Acquisition / sale of a company
Sooner or later, most company owners will ask themselves whether they wish to pass on their company to the next generation or sell it (as a whole or in part). While every company owner knows about the importance of their company, many are not or only insufficiently prepared when it comes to selling (part of) their company. Many will say: “I will take care of this when that moment arrives.” However, often this moment is postponed – due to a lack of preparation – until time is running out and options are fading or becoming very limited.
“Simplify the process by preparing well”
However, the entire process can be simplified by preparing well. By preparing well you strengthen your position in negotiations with the buyer, while significantly decreasing your own liability risk. Those negotiations are essentially about finding a contractual balance between the purchase price, on the one hand, and the seller’s willingness to make guarantees and (if applicable) assume liability for guarantees made.
What is to be considered?
Prior to a possible company acquisition, the buyer will examine the company closely (“due diligence”). A due diligence includes a careful review of legal, fiscal and operative or business aspects of the company. Based on the results of the due diligence, the buyer will prepare its offer and its requirements for the guarantees made and the level of liability to be assumed by the seller.
In contracts on the sale of a company, you will typically find guarantees on the following subjects:
- company structure
- accounting and taxes
- employment contracts
- contracts vital for business continuation
- data protection
- insurance
Therefore, the seller should examine the company’s structures, identify risks and eliminate them prior to the intended sale. As guarantees always extend to the past as well, violations (e.g. against minimum wage or privacy legislation) may result in fines even years later. Similarly, audits can lead to additional tax and social security demands from prior years. This is why the buyer will always try to make sure that the seller can be held liable for all occurrences prior to the transfer of the company. The “cleaner” a company has been kept in the years prior to the transfer (if necessary, with the help of qualified consultants), the easier it is for the seller to provide guarantees and restrict their scope in the negotiations.
“Consider the legal, fiscal and business structure of the company while the company is still in operation”
Therefore, every company owner is advised to consider the legal, fiscal and business structure of their company while the company is still in operation. After all, all findings of the buyer’s due diligence will eventually determine the purchase price and the liability requirements.
How can I help?
Do you wish to sell your company or take on an investor? Do you want to prepare your company for sale within the next few years or for passing it on to the next generation?
Or are you planning to acquire a company and need help with performing a due diligence and negotiating the contracts?
I will be happy to discuss the details with you. As your strategic partner, I will be at your side during the whole selling/acquisition process.