Company sale
Once the decision to sell your own company has been made, careful preparation of the sales process is key. It is a decisive factor in the success or failure of the sale and the price that can be achieved. The involvement of a professional advisor brings quality to the transaction and inevitably leads to a higher price.
In general, the highest price can be achieved when selling to an industry partner (trade sale). The buyer benefits from a synergy gain. A financial investor also usually pays a premium for gaining control of the company, but this is generally lower than in the case of a trade sale.
The time and effort required for a structured sales process should not be underestimated. Six to nine months is the rule.
FAQ - Sale of company
Selling your own company is a task that should be well prepared. This is especially true for entrepreneurs who are keen to place their life's work in trustworthy hands.
For most entrepreneurs, selling their own business is a unique experience that is associated with a high degree of complexity and emotional aspects. There are some key aspects to consider in order to ensure a successful and sustainable transition of your life's work to a successor.
These questions & considerations can help:
- Formulate a clear exit vision
Before the sales process is started, it should be clear what should happen to the company in the future and what characterizes an ideal buyer. If the company is being sold to an external party, there are a number of questions that need to be clarified at this point.
How do you envision the future of the company?
How do you imagine the ideal buyer?
- Make a clear decision to sell
The company can be sold in its entirety or only shares can be sold or retained in order to help shape the future of the company.
Would you like to sell your company in its entirety or retain a minimum share?
What characteristics of the company should the successor retain?
- Unique selling proposition (USP) of the company
For a successful company sale, it is important to be clear about the external image of the company. Every company has core competencies that set it apart. A clear formulation of the unique selling proposition (USP) offers the opportunity to achieve a higher purchase price in negotiations. On the other hand, it makes it possible to emphasize certain characteristics of the company that are important from an emotional point of view and should be retained. This underlines the uniqueness of the company.
What external impact does the company have?
In a company sale, a distinction is generally made between a deal share and an asset deal.
A share deal involves the sale of company shares, while an asset deal involves the sale of assets. These assets can be sold either individually or as a bundle. The legal form of the respective company plays a decisive role in the procedure. In the case of a corporation, for example, the shares are usually sold(share deal), while in the case of partnerships, assets are sold(asset deal). The tax and legal aspects must be taken into account for both forms of sale.
A successful company sale requires specialist knowledge and expertise, as there are a number of things to consider in a project of this scale, various phases to oversee and many complex steps to take. For this reason, it makes perfect sense to hire external specialists who are familiar with the sale of companies and can provide professional support with the following tasks:
- Objective of the sale
- Determination of the enterprise value
- Increase in company market value
- Preparation of sales documents
- Placement of the company on the market
- Selection of and negotiations with potential buyers
- Support for company audits
- Contract preparations
- Recommendation of further experts (e.g. change management experts)
- Mediation of investors
- Succession planning
- Accompanying the handover
The right expert not only has specialist knowledge, but should also be able to understand your personal motivation for selling the company. Only then will you have a partner at your side who really understands you and can act in your interests.
- Preparation is everything - careful & timely planning plays an essential role
- Professional company valuation
- Ensure transparency and integrity
- With a serious offer, the sales documents are always:
- complete
- fact- and data-based
- truthful and correct
- understandable
- Realistic
- rational
- Objective
- Seek advice on tax and legal issues
- The handover and integration of employees
1. preparation of the documents
- Annual financial statements
- Tax returns
- Business plan
- Sales development
- Employee contracts
- Real estate leases
- Patents
- Supplier contracts
- Customer lists
- Company-specific documents
2. find a buyer
- Define your ideal buyer
- Activate your own network
- Locate a sales specialist
3. select company successor
- Consider the future of the company
- Looking for someone with the right skills and experience
- Choose someone you can trust
- Make sure that the person is up to the responsibility
- Take care of a succession plan
4. audit of the company
- Commission independent third parties
- Carry out due diligence procedures
- Audit annual financial statements
- Check legal documents
- Check business processes
5. negotiate purchase price
6. drawing up a company purchase agreement
There are a variety of factors that have both positive and negative effects on your company valuation.
Here is a list of the ten most important criteria:
- Reason for the valuation
- Industry affiliation of the company
- Characteristics of the customer base
- Dependence on the entrepreneur
- Managing director's salary
- Sales and profit generated
- Investment and modernization requirements
- Seasonality
- Cyclicality
- Types of sales
- Income capitalization approach
- Multiple company valuation
- Simplified income capitalization approach
Occurs mainly with unlisted companies
The formula for calculating goodwill is as follows:
Simplified capitalized earnings value = average yield x capitalization factor
- Net asset value method
Auxiliary value, especially for the valuation of small businesses with expensive machinery or real estate. No intangible assets are taken into account here.
Formula:
Net asset value = market value of company assets - debts
More suitable for setting a minimum price
- AWH standard
Most specialists evaluate according to this method, which originated in industry, regardless of the type and size of the company
- Discounted cash flow method (DCF method)
Due to the complexity, the exact costs of a company sale or succession cannot be predicted in advance.
Typical costs of a company sale include, for example
- Preparation of a company exposé and a company valuation
- Search for company successors with an examination of their background and intentions
- Targeted approaching of coordinated prospective buyers
- Negotiation support and moderation
- Preparation of a letter of intent (LoI) or a term sheet
- Due diligence (DD), i.e. the detailed examination of the facts, strengths and weaknesses of a company
- Costs for tax consultants, auditors and lawyers to assist with all tax and legal issues, preparation of the purchase agreement
- Notary fees
- Success commission
The costs of a company sale range company sale range on average between 5 and 10% of the transaction amount. This usually includes the costs of all consultants, specialists and service providers involved in the transaction.