Successfully sell your company: From preparation to successful closing
The sale of a company marks a significant milestone in the life of an entrepreneur. Particularly in the SME sector, where companies often represent the life’s work of their founders, selling a company is usually a unique and emotional project. The decision to part with your company requires preparation and a considered approach.
A successful company sale involves several crucial steps: from thorough preparation, searching for potential buyers and approaching them confidentially, to negotiating and signing the contract. Each phase harbours its own challenges and requires specific strategies. In order to master this complexity, it is advisable to have an experienced consultant at your side to provide professional support throughout the entire sales process.
Reasons for selling a company
A company sale is often driven by various motives, both personal and strategic. Sooner or later, every entrepreneur is faced with the decision of whether and when the time is right for a sale. The most common reasons that can play a role in this important entrepreneurial decision are
Many entrepreneurs reach retirement age without having found a regular successor within the family or the company. The sale then becomes an option in order to secure the life’s work and hand it over to good hands.
Despite intensive efforts, some entrepreneurs are unable to find a suitable successor. In such cases, a sale to external investors or competitors can be a sensible alternative to ensure the continued existence of the company.
Sometimes market dynamics require a fundamental reorganisation of the company. If the necessary resources or expertise for this transformation are lacking, a sale to strategic investors who have the necessary resources and expertise may be the best solution.
Growth plans or necessary investments can require considerable financial resources. If self-financing is not possible, the partial or complete sale to investors can be a way of generating fresh capital and equipping the company for the future.
Entrepreneurs who want to diversify their assets or devote themselves to new projects can create the necessary liquidity by selling their company. This enables them to realise their financial goals or invest in new business areas.
The challenges of selling a company
The path to a successful company sale is not always straightforward. Entrepreneurs are often confronted with a variety of challenges that require careful planning and professional support.
One of the main challenges when selling a company is the “right” purchase price expectation. The valuation of the company provides initial indications for deriving a realisable sales price. There are various methods for valuing a company, such as the capitalised earnings value method or the net asset value method. Each method has its own advantages and disadvantages and should be selected carefully depending on the company’s situation.
The search for suitable buyers is another key challenge in the sales process. Potential buyers must not only be in a financial position to acquire the company, but must also be a strategic and cultural fit for the company. The use of networks, company exchanges and online platforms can help to identify suitable interested parties. The right buyer can make the difference between a successful and a failed sale.
Negotiations with potential buyers are often complex and require sensitivity and experience. It is not only about achieving the best possible price, but also about negotiating the terms of the contract, such as payment terms, transitional arrangements and liability issues. Successful negotiations require a clear strategy and the ability to respond flexibly to the buyer’s requirements and wishes without neglecting your own interests.
Due diligence is an essential part of the sale of a company and represents a thorough examination of all areas of the company by the buyer and its advisors. Buyers want to ensure that they have a complete picture of the company and that there are no hidden risks. This review includes financial, legal, tax and operational aspects and can take several weeks or even months. Careful preparation for due diligence can help to speed up the process and identify and resolve potential problems at an early stage.
Legal and tax aspects play a decisive role in the sale of a company. It is important to consider all legal framework conditions and tax regulations in order to avoid legal conflicts and tax disadvantages. This includes drafting and reviewing contracts, complying with tax obligations and optimising the tax structure of the sale. The support of experienced lawyers and tax advisors is essential to successfully master these challenges.
Each of these challenges requires specific expertise and experience. As professional advisors, LW-P Lüders Warneboldt can provide valuable support by guiding you through the entire sales process and representing your interests in the best possible way. Contact us for a free initial consultation.
Company valuation
The company valuation forms the seller’s basis for negotiations; it is not usually shared with the prospective buyer. A realistic and well-founded valuation is therefore crucial to the success of negotiations.
There are various approaches to company valuation, which are used depending on the sector, company size and specific characteristics of the company:
This method is based on the annual turnover or profit multiplied by a standard industry factor.
Here, the value of the company is determined as the net asset value based on the market value of its tangible and intangible assets.
In this approach, the value is determined by comparison with similar companies in the industry.
The value of a company is influenced by numerous factors. The most important of these include
A stable and growing profit increases the value of the company.
A strong position in the industry has a positive effect on the valuation.
Future prospects and expansion opportunities are important value drivers.
Qualified and motivated employees increase the value of the company.
Long-term and stable customer relationships are a valuable asset.
Modern technologies and innovative products can significantly increase the value.
The size of the company also plays an important role in the valuation. Larger companies often achieve higher valuations due to their market position and the associated lower risk.
Given the complexity and importance of valuing a company, it is advisable to consult an expert. A professional company valuation offers several advantages:
An external consultant provides a neutral, market-based assessment.
Experts have extensive knowledge of various valuation methods and industry specifics.
A professional valuation lends additional seriousness to the sales process for potential buyers.
A sound valuation forms a solid basis for price negotiations.
The company valuation is a combination of analysis, experience and market knowledge. It should take into account all relevant factors and be comprehensible. A realistic valuation is the key to successful negotiations and a satisfactory sale. Contact us for a professional company valuation.
The most important task of the M&A advisor: Finding the right buyer
The search for the right buyer is a decisive success factor. An M&A consultant structures the entire sales process for your company. They have the experience and knowledge to quickly identify and approach potential buyers. The network of other advisors and financial investors also plays a role here. They prepare professional sales documents, manage the data room for the due diligence process and conduct negotiations with potential buyers on your behalf.
Marketing your company: The professional presentation of your company is crucial. The following steps are important:
- Preparation of a confidential information memorandum: This document contains all relevant information about your company, such as key financial figures, market position and future prospects.
- Targeted approach: Identify potential buyers in your sector and approach them directly – while maintaining confidentiality.
- Act swiftly: If a potential buyer expresses interest and submits a non-binding offer, the due diligence process should start quickly and be carried out swiftly. Questions from prospective buyers should be dealt with promptly, which requires additional time.
Check potential buyers: Selecting the right buyer is critical to a successful sale. Consider the following criteria when evaluating potential buyers:
- Financial capacity: make sure the prospective buyer has the necessary funds.
- Strategic fit: Check whether the buyer’s goals and values harmonise with your company.
- Industry experience: A buyer with experience in your industry can often offer added value.
- Future plans: Find out about the buyer’s intentions for your company.
The 10 most important steps in selling a company
A structured sales process is the key to success. It gives you as the seller security and creates trust among potential buyers. We guide you through every single step and ensure that you are optimally prepared.
The first step is to compile and prepare all relevant documents. This includes financial reports, contracts, customer lists and other documents that provide information about the economic situation and potential of your company. A thorough analysis of these documents is the basis for a realistic asking price and a convincing presentation to prospective buyers.
Clearly define what you want to achieve with the sale. Are you looking to maximise the sale price, secure your life’s work or a combination of both? Defining your goals in advance will help you to organise the sales process in a targeted manner and make the right decisions.
A professional exposé is your business card for potential buyers. It should provide a comprehensive overview of your company, emphasise its strengths and arouse interest. Make sure it has a clear structure, meaningful figures and an appealing design.
Identifying and approaching strategic interested parties, financial investors or MBI (management buy-in) candidates requires time and experience.
In sales meetings, you have the opportunity to present your company in person and convince potential buyers of the benefits of a takeover. Prepare yourself well, present your strengths and answer questions openly and honestly.
Price negotiations are a crucial step in the sales process. This is where you need to represent your interests and achieve a fair price. An experienced consultant can help you to strengthen your negotiating position and find a solution that is acceptable to both sides.
Due diligence is a comprehensive examination of your company by the potential buyer. All aspects are scrutinised, from the finances and contracts to the employees. Transparent and well-prepared due diligence is crucial for a successful sale.
The purchase agreement regulates all the details of the company sale, from the purchase price and payment terms to liability issues. Make sure that all agreements are clearly and unambiguously formulated and, if in doubt, seek advice from a lawyer.
Once the contract has been signed, the company is handed over to the new owner. This process should be carefully planned and implemented to ensure a smooth transition. Support the new owner with the familiarisation process and ensure that all important information is handed over.
Follow-up support is also important after the transfer of the company. This phase includes supporting the new owner with familiarisation and answering any unanswered questions. Good aftercare helps to ensure the long-term success of the company and bring the sales process to a positive conclusion.
With LW-P Lüders Warneboldt, you have an experienced partner at your side who will guide you through the entire sales process and help you to sell your company successfully. Contact us for a free initial consultation.
Legal and tax aspects
The sale of a company is not only an economic challenge, but also a legal and tax challenge. Careful planning and consideration of all relevant aspects are crucial in order to avoid legal pitfalls and utilise tax advantages.
The legal form of your company determines the process and the legal framework of the sale. Is it a sole proprietorship, a limited liability company, a public limited company or another legal form? Each legal form has specific requirements and special features that need to be taken into account.
Should individual assets or the entire company be sold? Which contracts and authorisations are required? These questions need to be clarified in advance to ensure that the sales process runs smoothly.
The sale of a company has tax implications. Depending on the legal form and structure of the sale, different taxes are incurred, such as income tax, corporation tax or trade tax.
Tax-optimised structuring of the sale can help you to minimise your tax burden. As there is hardly any potential for tax optimisation shortly before the start of the sales process, you should consult an experienced tax advisor at an early stage who will inform you about all relevant aspects and show you individual solutions so that you can still implement them.
Even after the sale, sellers can still be liable for certain liabilities of the company. Careful contract drafting is essential to minimise these liability risks. All relevant liability issues are regulated in a comprehensive purchase agreement and clear provisions are made for the transfer of rights and obligations. Due diligence plays an important role in avoiding liability; any facts that the buyer is aware of cannot be used against you later.
The sale of a company also has an impact on employees. Depending on the terms of the contract, existing employment relationships may be transferred to the buyer or there may be redundancies.
It is important to know and observe the labour law regulations. These include the duty to inform the works council, compliance with notice periods and the consideration of special protective provisions for certain groups of employees.
Selling a company: Advice from LW-P Lüders Warneboldt
The sale of a company is a decisive step for every entrepreneur and requires comprehensive support from experienced experts. As a consultancy firm, LW-P Lüders Warneboldt not only offers you expertise in all relevant areas, but also accompanies you personally and individually through the entire M&A process.
Our M&A consultants and experts from the fields of tax consultancy, legal advice, auditing and management consultancy work hand in hand to offer you a customised solution.
What you can expect from us:
- Strategic preparation: We support you in the preparatory considerations regarding the business, legal, tax and organisational structuring of the transaction. Our aim is to optimally position your company for the sale.
- Partner search: We use our experience to help you find the ideal buyer for your company. We identify potential buyers and establish contact, always with the utmost discretion.
- Preparation and evaluation of documents: Our experts support you in the preparation of all necessary documents, from information memorandums to detailed financial analyses. We ensure that your company is presented professionally and attractively.
- Due diligence: We guide you through the entire due diligence process. Our consultants organise and coordinate the audit, prepare you optimally and help you to identify and address potential stumbling blocks at an early stage.
- Negotiation management: We are at your side as experienced negotiators during purchase price and purchase agreement negotiations. Our aim is to achieve the best possible conditions for you and at the same time find a fair solution that is acceptable to both parties.
- Customised solutions: Every company is unique, and this is reflected in our consulting approach. We develop customised solutions tailored to your specific situation that take your goals and needs into account in the best possible way.
- Holistic support: As an interdisciplinary team, we cover all relevant aspects of selling a company. From tax optimisation options and legal protection to strategic considerations – we offer you advice from a single source.
Put your trust in our expertise and let us work together to make the sale of your company a success. Contact us for a no-obligation initial consultation and find out how we can support you in this important step.
Conclusion
The sale of your company is a significant step that requires careful planning and professional support. From the valuation of your company and the search for a suitable buyer to the drafting of the contract and handover – each step in the sales process harbours its own challenges and opportunities.
Medium-sized companies planning to sell their business should start preparations at an early stage and seek comprehensive advice. The expertise of LW-P Lüders Warneboldt can help to optimise the sales process and minimise potential risks.
FAQ - Frequently asked questions on the subject of company sales
The sale of a company requires careful preparation. Start with a company valuation, create an informative exposé and look for suitable buyers. The support of an experienced advisor can considerably facilitate and optimise the structured sales process.
Important aspects include a realistic purchase price expectation, the preparation of all relevant documents, maintaining confidentiality, approaching the right buyer and taking legal and tax implications into account. Thorough due diligence is also essential.
The sale price of a company depends on many factors, including profitability, industry affiliation, market conditions and the financial health of the company. The price is often determined through negotiations between the buyer and seller.
The costs vary depending on the size of the company and the complexity of the sale. Costs for M&A advisors, lawyers and tax consultants must be taken into account. The costs are tax deductible.
The optimum time depends on various factors, such as the entrepreneur’s personal situation, the market situation and the company’s development. Ideally, you should sell in a phase of growth and good future prospects as well as a positive overall economic environment.
Taxation depends on the legal form and the structure of the sale. Tax allowances and tax concessions can reduce the tax burden.
When a company is sold, ownership and control are transferred to the buyer. Employees, customers and suppliers usually remain in place. The new owner can make changes to the strategy and organisation.
In a share deal, company shares (shares or GmbH shares) are sold. The buyer takes over the entire company with all rights and obligations. In an asset deal, individual assets of the company are sold, whereby the buyer only takes over selected assets and, if applicable, liabilities.
Common methods are the capitalised earnings value method, the discounted cash flow method and the multiplier method. Factors such as turnover, profit, cash flow and industry key figures are taken into account. A combination of different methods is often used to determine a fair value.
