As experienced M&A advisors, we navigate you through all phases of the company sale

Professional support for the sale of a company by an M&A advisor should increase the purchase price and the probability of completion. In addition, relieving the burden on management is a key argument for involving an advisor. In certain phases of the sale (e.g. negotiating the share purchase agreement), the involvement of a specialized lawyer is also necessary.

A company sale is particularly successful if the sales proceeds meet or even exceed the seller’s expectations. The buyer should be a good fit for the company and ideally be able to contribute to its long-term development. To achieve these goals, it is worth consulting an experienced M&A advisor.

There is no such thing as an objective valuation when selling a company. Ultimately, the value of the company will be the price a buyer is willing to pay. Nevertheless, there are approaches with which a realistic range of valuations can be determined and discussed in advance of a company sale.

To do so, a consultancy researches comparable transactions and considers the relationship between the company’s own sales or profitability ratios and the available ratios of such sales (“transaction multiples”). For listed companies operating in the same or similar segments, the corresponding valuations are analyzed (“comparables”). In addition, based on a business plan, future cash flows can be incorporated into a discounted cash flow model (“DCF valuation”). A consultancy uses multiples and comparables to get a feel for an achievable valuation even before the actual M&A process begins.

The starting point for researching a list of possible buyers (so-called long list) is to consider for whom the company is interesting and for what reasons. Possible buyer groups are, for example, foreign competitors who will succeed in entering the market with the takeover. Suppliers who work in neighboring market segments and who can integrate the company’s range of services into their own portfolio. Companies upstream or downstream in the value chain that want to integrate more vertically, etc. In addition, there is the large class of financial investors who want to take over and further develop independent businesses.

As a professional M&A advisor, Quantum Partners combines various methods and sources to arrive at a comprehensive, yet qualified longlist. Among other things, we draw on special databases, our own research, expert interviews and our broad network. Together with the client, the longlist is then condensed into a so-called shortlist. This contains the potential buyers who will be contacted in the first step.

The first step typically requires a comprehensive company presentation (the so-called information memorandum). In addition, a complete financial plan with a review, a forecast for the current financial year and a plan for the next 3-5 years is required as the basis for the figures section, i.e. for quantitative corporate planning. Owner-managed companies can often take a pragmatic approach to their financial planning. Sometimes there is no formal budget, as the entrepreneur does not have to answer to anyone. However, the buyer of a business cannot do without proper and detailed financial planning. They also want to understand exactly how sales, margins and earnings have been structured in the past and are expected to be in the future. In most cases, he will also need a projected balance sheet as well as investment and cash flow planning.

The tax payable on the sale of a company mainly depends on the legal form of the shareholder and the type of sale (share deal or asset deal). If, for example, a natural person sells more than 1% of the shares in a GmbH from their private assets, 60% of the capital gain is taxed at the individual tax rate (so-called partial income method). We recommend discussing and assessing the tax consequences of a transaction with your tax advisor in advance.

The right timing is crucial for a successful company sale: a company can be sold well and will achieve an attractive valuation if the business is doing well and the future prospects are positive. But of course, external factors such as developments in the specific sector and the general economic situation also have an impact on the M&A process.

When a sales process is started and concrete figures and plans begin to be communicated to interested parties, it is very important that the plans are also fulfilled during the negotiations and due diligence. If, for example, the sales pipeline is well filled and the forecast is realistic, this is an important prerequisite for a good result.

In the case of privately held companies, the most important reason for selling a company is to manage succession. However, the further development of the company by integrating a strategic partner can also be an important goal. If companies have been financed by venture capital or private equity, these partners will inevitably seek an exit. After a certain holding period, the investment is sold in order to repay the fund investors.

The M&A process typically takes around six to eight months from preparation to closing. The actual duration is significantly influenced by the complexity of the company and the preparation of the seller. If the necessary documentation is available and the company to be sold has very good management information systems, a process can also be completed in around four months. However, this would be very quick.

In reality, there are often gaps in the documentation and controlling, which prolong the preparation process. If you are thinking about selling your company in the medium term, we can help you prepare efficiently as part of a ready-to-exit project.

Often, the topic of selling a company is associated with disadvantages for the employees involved. This may be the case with very large acquisitions, where the focus is on achieving synergies and reducing costs. In the case of technology-oriented or medium-sized company sales, with which the buyer, for example, opens up a new market segment or enters a market, the sale can open up new opportunities and potential for the employees involved.

For example, employees of a regionally active company may be offered different career opportunities in a larger group, or they may be able to take on more interesting, internationally oriented tasks. Often, better resources, a strong brand name or the better sales network of the new partner are available. Normally, the buyer of a company wants to ensure that employees continue to perform well under the new owner. Therefore, it is often considered how to additionally motivate employees after a transaction.

In an advanced transaction process, usually after conclusion of the letter of intent (LOI), the buyer will want to investigate the company carefully. This is done in what is known as due diligence. In this risk assessment, the buyer is supported by appropriate experts. The scope and length of a due diligence depends in particular on the size and complexity of the target company.

The main areas of investigation include, in particular, the formal topics of law, finance and taxes, the market, customers and business model (“commercial”), as well as technology and IP. If risks (so-called red flags) are identified at the target company during the due diligence process, this can have an impact on the company valuation and the further course of negotiations.

In the run-up to a due diligence, Quantum Partners prepares a well-structured virtual data room together with the seller, in which the buyer can access all necessary information. We will be happy to provide you with a comprehensive due diligence checklist free of charge and without obligation upon request.