Frequently asked questions

In case you cannot find the answer you are looking for, we are happy to discuss your specific questions. Just call us on +49 (0)221 5694-457.

How much is my company worth?
How long will it take to sell my business?
What do I need to do to prepare for the sale?
Where do I get legal advice?
Where do I get tax advice?
What size and type of company do you help?
What is Due Diligence?
What is the Business Purchase Agreement?

How much is my company worth?

There is no simple answer. Traditional methods often quote a multiple of 6 or 7 times adjusted operating profit. This does, however, not reflect the real value. The reality is that the valuation of your business may be worth much less than the above or much more. Motives and not multiples determine value. On average we find that the difference between the highest bidder and the lowest bidder is 2.5 times. The reason for this is that they are buying with different motives. A strategic buyer is likely to pay a higher price than a return on investment buyer. Your objective must be to put yourself in the best possible negotiating position and that means having a choice of buyers. It also means being well prepared for the negotiation.

How long will it take to sell my business?

Again, there is no simple answer. Many shareholders never manage to sell their companies, others take many years. The main reason for this is a passive selling process. No enquiry generation means that you rely on a buyer finding you. Not only can this take many years but leaves you in a poor negotiating position. With our active selling process, our clients have an aspiration of ten to twelve months. Sometimes it can be less sometimes a little longer. From the brief to received bids is consistently 5/6 months. The Due Diligence and Legal processes are more difficult to guarantee.

What do I need to do to prepare for the sale?

Together with you we will carefully work through our check list in order to prepare for the forthcoming negotiations. We will need to collect all the information necessary to answer the questions that may be raised during the negotiation meetings. Our objective is to prepare yourself to a stage in which at no time you give away control. Often the first prospect buyer will be the one buying your company. Therefore everything needs to be perfect from the beginning. We also recommend to take early tax advice in order that the lawyers can structure the deal in the most tax efficient way.

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Where do I get legal advice?

Along with your accountant, your lawyer plays a key role in your plans to sell your business. It may be that the lawyers that you use for general commercial activities are not experienced in the mergers and acquisitions field. If this is true then find another practice. It may also be worth considering that your present lawyer has a built-in incentive to dislike any deal you may propose: if you sell your business, he or she will probably lose a client! There are a good number of experienced regional practices that will do an excellent job. We can help you finding a good practice that puts the focus entirely on you.

Where do I get tax advice?

If you've used an accountant regularly to prepare your tax returns and draw up financial statements, he or she will be very well acquainted with the financial shape of your business. This knowledge may be helpful during the due diligence process. It is absolutely essential that at least one of the members of your team be an expert in dealing with the tax aspects of business sales and acquisitions. This person may be your accountant, your lawyer, or you may also decide to hire a specialist solely for this purpose. Taking advantage of tax-saving opportunities requires planning in advance. We suggest that you start talking to an adviser 4-6 months before a deal is expected.

What size and type of company do you help?

Most of our customers are small to medium sized businesses with annual turnover of 2 Mio Euro to 50 Mio Euro. You might be interested to know what characteristics are likely to make a company more attractive to a buyer:

An enviable client base without vulnerability to any single customer
Strong potential for growth
Scarcity
Cash generation
Good reputation
Guaranteed income streams

Things to be avoided include:

Serious unresolved litigations
Major financial debts
Skeletons in the cupboard
Minority shareholder problems

What is Due Diligence?

After a buyer signs a letter of intent, the buyer will have a specified period of time in which to conduct a due diligence investigation of the seller and the company. During this period, your buyer should have access to your financial and other records, facilities, etc.. The vast majority of it is in the form of paper. The buyer will want to see copies of all leases, contracts, and loan agreements in addition to copious financial records and statements. They may ask you for more and more information until you feel overwhelmed! We suggest that you respond patiently, and cooperate as much as you reasonably can. Just keep your mind on the goal - selling your company at a price and terms you can live with. You should also do some serious investigating of your own. You'll want to find out the buyer's credit record, management experience, reputation, and the plans he or she has for your company's future operation. This is particularly true if you plan to continue an employment or consulting arrangement with the buyer after the sale.

What is the Business Purchase Agreement?

The purchase agreement for your business is one of the most important legal documents you'll ever sign. After all, many years of hard work will culminate in this single transaction. You don't want to have problems collecting the money due you or to have legal problems haunting you into the future, and a carefully constructed purchase agreement can be your best insurance policy for preventing such catastrophes. Customarily, the buyer's lawyer provides the initial draft of the purchase agreement for a business. This makes sense, since the buyer has to live and work with the company. However, we suggest that your lawyer should draft the sections that are most important to you. In most cases, that means the clauses containing representations and warranties about the business. Ideally, you should try to avoid or limit the making of any warranties or guarantees for which you can be held legally accountable.

Here's where a good lawyer can pay dividends. Make sure that you maintain on-going liability insurance for any liabilities that will remain with you - for example, product liability insurance on products that were sold during your tenure as owner. Once both parties have agreed on the language of the purchase agreement, it will be signed by both parties. The contract will state the date at which the final transfer of ownership and possession of the business will occur, and when the seller will get the money. With a signed purchase agreement in hand, the buyer can finalise any financing arrangements with outside lenders in anticipation of the closing.

If you have any further question or you wish to ask our expert team, please do not hesitate to call us on +49 (0)221 5694-457. Or click Here to contact us.