Case Study

$13 Million Saved: Preparing a Founder for a Successful Exit

SUMMARY/OVERVIEW

How proactive sell-side tax planning transformed a beverage company’s exit outcome

For some founders, building a successful business is only one part of the story. Sometimes the journey ends with an exit strategy that begins long before a buyer enters the picture. After attracting interest from a private equity firm, the founder of a thriving organic beverage company found that, although the business was operationally sound, its tax and compliance structures had not been designed with his long-term exit strategy in mind. To help position the company for a potential sale, BDO professionals worked with the founder to evaluate accounting methods, tax structures, and potential risks likely to surface during due diligence.

By addressing those issues in advance, the company strengthened its transaction readiness and improved the founder’s financial outcome at closing. In addition to reducing his tax obligations by $13 million dollars, the founder rolled over a portion of the sales proceeds, creating the potential for tens of millions in additional investment returns.

Key Takeaways

Tax strategies aligned for clean exit strategy

$13 million in tax savings at closing 

More than $40 million netted post-closing

Person reaching for a beverage.
The Challenge

Hidden Tax Risks Threatened a High-Value Exit 

The company’s strong financial performance and market position had made it an attractive acquisition target for a private equity firm. However, a detailed review of the company’s records identified significant concerns and risks likely to surface during the buyer’s due diligence, especially in the following areas: 

  1. Sales Tax

    As the company expanded distribution across multiple states, its sales tax obligations had become increasingly complex. Multi-state activity created nexus questions that required state-by-state review and analysis. 

  2. Accounting Methods

    Sophisticated buyers were expected to scrutinize the company’s accounting methods during due diligence, and certain methods required adjustment during the transaction readiness process.

  3. Ownership Structure

    As an S corporation based in a state with personal income tax, the company’s location and ownership structure exposed the founder to substantial tax burden upon closing. 

Because the company had focused on growth and ongoing compliance rather than long-term exit planning, its weak transaction readiness jeopardized valuation, complicated negotiations with the buyer, and risked delaying the deal. 

Person reaching for a beverage.
The Approach

Proactive Sell-Side Planning and Risk Mitigation for Exit Readiness

Keeping the founder's long-term goals in mind, BDO professionals took a proactive approach to preparing the company for a future transaction. 

Over a 12- to 18-month period, the team worked closely with the founder and management team to address the following priorities:

  • Compliance

    Our professionals identified compliance gaps and implemented accounting method changes supported with proper business-purpose documentation, improving both compliance and audit readiness. 

  • Sales Tax

    We reviewed the company’s state tax footprint based on its distribution model, separating its tax years, income nexus, and sales nexus. This work helped clean up the company’s tax profile and supported compliance with complex state tax rules. 

  • Personal Income Tax

    The company’s location and ownership structure increased the owner’s personal income tax burden; relocating to a more tax-efficient jurisdiction proved to be the best strategy. The founder and the company headquarters gradually moved to a state where the company already operated. The transition was carefully structured, documented, and coordinated with legal counsel to support the business purpose behind the changes. 

  • Transaction Structuring / Modelling

    We assisted the founder with evaluating and modelling various transaction structuring alternatives, performing a transaction cost analysis, and structuring a tax-deferred rollover to maximize the founder’s after-tax proceeds in the transaction.

$13 million tax reduction in the founder’s tax liability at closing.

One team member with a long-standing relationship with the founder served as the primary point of contact. BDO team members from other practice areas — including state and local tax, accounting methods, and the National Tax Office — helped mitigate risks and position the business for a successful exit. By managing key issues well in advance of a transaction, the company entered the sale process better prepared for buyer scrutiny and due diligence. Learn more about BDO’s tax transaction advisory services. 

Person reaching for a beverage.
The Results

A Clean Exit and $13 Million Preserved 

The founder entered negotiations from a position of strength. Our team’s proactive approach helped resolve compliance issues and mitigate material tax risks tied to the company’s structure and multi-state operations. As a result, the company completed its sale without disruption, avoiding issues that could have delayed the deal or created concerns during buyer due diligence. The work also generated approximately $13 million in tax savings for the founder at closing.

The transaction also enabled the founder to retain an ownership interest in the business through the private equity deal. By rolling over a portion of the proceeds, he later realized more than $40 million in a subsequent exit.

This engagement illustrates the value of proactive planning that aligns tax, business, and exit strategies well before a transaction is on the horizon. By addressing potential risks early and preparing both the business and the founder for buyer scrutiny, BDO professionals helped preserve value at closing and support a smooth sale process that improved the founder’s rewards attained from a business built over decades.

We worked as strategic tax advisors to the founder throughout this transaction, aligning our approach with his long-term goals and identifying the most effective path to achieve them.
Daniel Castro
Florida Tax Market Leader

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