FAQs about selling and handing over a company
Who is the right candidate for a takeover or transfer of my business?
You should look for a successor who can cope with the company’s goals and requirements. Additionally, you should start searching in good time, and not just in your immediate environment. See whether the children in your family are suitable. If you decide to sell your company to unrelated third parties, companies or investment firms, you should use an experienced M&A advisory firm.
When should I begin preparations?
You should start your preparations years before the planned sale. Develop a long-term strategy for the handover of your company, and for yourself during the period afterwards.
How do I find a suitable acquirer/successor?
Professional M&A advisory includes not just many process steps but buyer identification as well. Your company’s first impression on prospective buyers is decisive and calls for a professional business exposé or information memorandum.
How much is the company worth?
A valuation of your company should be done by experts who know the special characteristics of your industry. Take the expertise of experienced M&A advisors into consideration.
How do I hand over my company?
Obtain advice on the different forms of takeover and company acquisition to understand the related advantages and disadvantages.
How can I minimise my tax burden?
Contact your tax consultant or auditor to obtain information on the specific tax consequences and the possible ways of reducing your tax burden through the form of business transfer, deal variants and other intelligent arrangements.
Do I have to pay my employees a severance settlement?
No. In principle, the acquirer/successor must take on all employees within the framework of company and legal succession.
Who can help me during settlement?
Don’t rely on the services of your tax or legal advisors alone. Seek out the track record and experience of M&A advisors. Only these professionals have the time and the strategic resources it takes to organize the sale process from A to Z.
What aspects should I take into account when composing contracts?
Specimen contracts may only serve as a guide. Don’t be afraid to spend money on a good lawyer who will draw up a contract tailored precisely to your case.
On what basis will I cooperate with the acquirer/successor in the future?
Obtain advice on the consequences of cooperation. At least in most cases, a consulting agreement is preferable to a regular contract of employment.
How can I secure my financial claims against the acquirer/successor?
If possible, arrange for one-off payments so that you are not dependent on the business skills of the acquirer/successor. The selection of the right successor or buyer and a convincing business concept are good safeguards and make a major contribution to financial security.
FAQs about business acquisitions
Is a business acquisition advisable?
Compared to launching a new company from scratch, a takeover presents substantial advantages in terms of time and cost. It all depends on the individual case, though, whether the right choice has been made in regard to the industry, company size, expertise and future prospects of the company, and whether you obtained detailed advice on the advantages and disadvantages at stake.
How do I find the right company?
Chambers of industry and commerce, trade associations and other institutions offer a large number of companies. However, the question of quality depends on the individual company. Quality instead of quantity is the maxim here. Experienced M&A advisory firms only take on mandates if the quality of a company is likely to result in a timely and successful sale. The leading firms in this industry often have excellent contacts with so-called “hidden champions.”
How should a company be valued?
Try to find out as much information as possible about the company and its market (position). It is necessary to obtain a picture of the company’s health by asking experts to analyze the business figures, balance sheets from the past few years and future plans.
Do I have to take on every employee?
In principle, the acquirer/successor must take on all employees within the framework of business and legal succession.
Can I take over the company's customers?
Generally speaking, a transaction also includes the company’s customer base. Contractual provisions (customer, vendor or loan agreements) must be reviewed, however, for the existence of what is known as a “change-of-control” clause (option of termination upon change of ownership).
What liability risks do I face?
That depends on the type of company takeover and the contract arrangements made. Obtain detailed information from your lawyer on ways of limitating liability risks.
How much is the company worth?
Neutral experts should verify the disclosures and the asking price. It’s vital to conduct extensive due diligence and compare the asking price with the firm valuation. M&A advisors are familiar with the conventional market valuation approaches and can also issue what is known as a “fairness opinion”.
What are my capital requirements?
The purchase price isn’t the end of the story. You should also consider the expenses for your tax and legal advisors, including the notary, and any other officially fixed fees (e.g. change in the Commercial Register), success fee of the M&A advisory firm, current account limits for preliminary financing of operating resources, inventory, etc. It is also important to have a financial cushion for unexpected expenses during the transitional phase.
Can I finance the business acquisition?
This depends on the financing you have available and on the amount of the existing capital and amount of debitable cash flows and the equity situation of the company. Always negotiate with multiple banks and obtain the funds before you sign a contract. In certain constellations, it also makes sense to involve investment firms.
What are my profit expectations?
Use the past business figures of the predecessor firm as a basis for forecasting. If all other things are equal, you can forecast your expected revenue and profit on this basis. Together with your M&A advisor, tax consultant or accountant, develop a profit plan, complete with synergy potential, for the next 2 to 3 years.