Selling your company? Reasons, process and tips for a successful company sale

Reasons for selling a company

The reasons for selling a company can be very different. The following are conceivable:

• the desire for new entrepreneurial challenges or personal development
• the search for a suitable successor
• financial reasons
• health reasons
• Adaptation to changing market conditions
• Reduction of entrepreneurial risks
• Profitability optimization to maximize the sales price
• retirement provision
• Adaptation to structural changes

Determine enterprise value

An important step in the preparation of a company sale is the determination of the company value. This value forms the basis for the sales price and can significantly influence the success of the entire sales process. Various methods are available for company valuation. Each method takes different aspects of the company into account. In order to achieve a realistic sales price, it is advisable to seek professional advice. This will ensure that the sales process is based on a solid foundation.

Process of a company sale

The process of selling a company can be divided into several phases:

Phase 1: Commissioning & company analysis

The sales process is initiated in phase 1. As a rule, an M&A consultancy is commissioned to analyze the company, identify potential weaknesses and strengths and develop a comprehensive strategy.

Phase 2: Investor presentation

In the next phase, the sales strategy developed is transformed into a convincing investor presentation. The negotiation strategy is also planned.

Phase 3: Investor selection

The next step is to identify and select potential investors. Both financial aspects and strategic compatibility are taken into account here.

Phase 4: Investor approach and LOI

After approaching investors, the company is presented. The letter of intent (LOI) is the first important step in communication with the interested party. It expresses the investor’s interest in buying the company.

Phase 5: Exclusivity & due diligence

In the next step, you as the seller grant the selected investor exclusivity. In this way, you enable him to carry out detailed due diligence to thoroughly examine all aspects of the company.

Phase 6: Contract creation

The purchase agreement is drawn up based on the results of the due diligence. In this phase, all key conditions and agreements are defined to ensure a smooth transition.

Phase 7: Signing & closing

The last step is the signing of the final purchase agreement and the closing of the transaction – only at the latter stage does the money flow. Depending on the sector, a few months can pass between signing and closing.

10 tips for the successful sale of a medium-sized company

The following steps must be observed for a successful company sale:

1. Determine the terms on which you want to sell your company before the sales process

Why do you want to sell your company? Have you really made a conscious decision and weighed up all the pros and cons? Selling your company often means parting with your life’s work. It is not a decision that should be taken lightly. The reasons can vary. Do you want to find a company successor? Is your goal simply to sell shares? Make a firm decision regarding your desired future for the company. Determine for yourself what the ideal buyer or partner looks like.

2. Choose the best time to sell your company

It is also important to choose the right time to sell the company. Ideally, the company should be sold when it is running very well and independently and will probably continue to run well in the future. However, if you plan the sale when the company is in crisis or are no longer in a position to run the business, you will put yourself in a bad negotiating position. In addition, the current market value can be increased at the optimum time. It is crucial that you are not under any pressure to act at this point. Instead, use your good position and also seek individual advice.

3. Obtain professional advice on tax and legal issues relating to the sale

The sale of a company is a very complex process that is underestimated by many company owners. Tax and legal issues must also be dealt with and numerous questions will certainly arise in this context. Take advantage of the experience of legal and tax specialists here too. This will ensure that you have all the necessary documents with the correct wording when it comes to the sale. The same applies to various insurance, employment and liability contracts.

4. Take your time and plan the sale of the company thoroughly

Selling a company can take several months or even years. Thorough preparation is the first step towards a successful sale. So, plan enough time and get professional help with the organization. Selling your company is a very emotional matter, which leads many owners to put off the sale for many years until the day suddenly comes when action is needed. Ideally, however, appropriate preparation for the sale of the company should be started two to three years in advance, depending on the complexity of the business model.

5. Engage an experienced M&A advisor

This is one of the essential questions you should ask yourself before selling: How do I find a buyer for my company? Here, too, it is worth relying on professional support from an M&A consultancy such as Conpair. We have already been able to help numerous entrepreneurs from the SME sector with the sale, from advice and the search for investors through to the successful conclusion of the contract. Benefit from the broad network of a professional M&A advisor.

6. Have a meaningful sales offer prepared

How high should the sales price be set? Try to take the buyer’s perspective here. Many entrepreneurs overestimate the value of their company and neglect the fact that potential buyers value the business in terms of returns. It is highly recommended to consult an expert for an objective company valuation. In this way, unrealistic price expectations can be avoided, which would otherwise become a major obstacle to the sale.

7. Be honest and transparent with potential buyers

It is rare for a company not to have even the smallest vulnerability. However, concealing these can have negative consequences. Faultless preparation of all documents with all the facts presents you as a professional and serious seller. Experienced potential buyers in particular pay attention to every little detail and quickly weed out dubious offers. So make sure your documents are complete, correct, realistic, objective and based on facts and data. If a potential buyer discovers defects themselves, there is a risk of a significant price reduction and, in the worst case, no deal will be concluded.

8. Show potential buyers what valuable assets your company has

When selling a company, it is very important to disclose the company’s true earning power. If there are unprofitable assets, these should be eliminated or sold. In the case of medium-sized companies, privately used assets are often acquired through the company and capitalized in the balance sheet. These can be removed from the company without impairing the company’s activities.

9. Plan the handover of your company carefully and inform your employees in good time

Upon successful completion of the transaction, the new owner assumes the position of employer. This means that all rights and obligations arising from the employment relationships are also taken over. Before the company is handed over, it should be ensured that all jobs are secured. Make sure that your employees are informed about the sale of the company at an early stage.

10. Let go

Company sales demand a lot from an entrepreneur, both on a business and emotional level. Particularly in the case of family businesses that are to be handed over to a new owner, the sale is a decisive turning point in professional and private life. Professional M&A advice is aware of the emotional challenges and supports you from the outset so that you can mentally prepare for the separation and let go of your company.

Conclusion

All in all, selling a company is a lengthy, complex and stressful process for entrepreneurs. So that you can concentrate on the business until the sale, it is helpful to get support from a professional M&A advisor. This way, you can be sure of finding the right buyer and handing over your company for a successful future.

Buyer or company succession wanted?

Are you thinking of selling your company? Then we will be happy to assist you. We will guide you through the complex process and support you in your search for the right investor. Leave the work to us so that you can get on with your day-to-day business. Get in touch today – we look forward to hearing from you!