¿Cómo vender mejor tu empresa? René de Jong

1. How Best to Sell your Business
Jack Coronna, Thomas Meier & René de Jong
ICEF Berlin 30th October 2016

2. Jack Coronna
Why and when to sell your business?
Thomas Meier
What to look at before?
How to market your business?
DIY or get help?
René de Jong
What price to expect?
What to consider negotiating the contract
contact@renedejong.com
You
Questions

3. Why and when to sell your business?
✓ Do not allow yourself or your business to get past the sell by
date
✓ You never know what will happen, world events will impact on
the timing of selling your business
✓ Focus on growing the company and aiming to become a
market leader
✓ You will be in the strongest position if you sell because you
don't have to
Jack Coronna

4. Why and when to sell your business?
✓ Ask yourself if you are mature enough to sell your business
✓ Consider how your life will be once you have sold your baby
✓ Can you get enough money to finance your needs once the
business has gone?
✓ What are you going to do after your business is sold?
Jack Coronna

5. Why and when to sell your business?
✓ If you invest in new ventures, make sure that you have
enough left from your sale to cover your life style in the event
of failure
✓ If the purchase price is split between cash and shares, make
sure that the cash lump sum is enough to cover your needs
when share price declines
✓ Ensure your key team players are aware of your plans, but
don’t let your staff know
✓ Tidy up your business
Jack Coronna

6. What to look at before?
How to market your business?
Thomas Meier

7. What to look at before?
How to market your business?
Value Driver 1: The quality of your business
Value Driver 2: The quality of the sales process
Thomas Meier

8. Value Driver 1: The quality of your business
✓ Attractive profit & revenue line
▪ Take opportunity of a good financial year
▪ Push high margin sales
▪ Maximize profitability
▪ Cut dispensable cost
▪ Take out private spending
✓ Make yourself redundant
▪ Strong management
▪ Bind key staff by incentives
Thomas Meier

9. Value Driver 1: The quality of your business
✓ Diversify customer base
▪ Get less dependent from single customers /
countries
▪ Increase recurring revenue instead of one time sales
▪ Consider change of ownership reaction of main
customers
✓ Cleanup the balance sheet
▪ Get rid of non-core assets and privately motivated
cost
▪ Stop typical shareholder expenditure habit
▪ Pay back private loans and reduce the working
capital
▪ If there is a private pension scheme, consider to take
it out of the company
Thomas Meier

10. Value Driver 1: The quality of your business
✓ Financial controlling
▪ Prepare accurate and reliable financial
statements for the last three years, if possible
audited
▪ Get most important KPI's for your industry
▪ Be aware that inaccurate financials are often a
deal breaker
✓ Tax checkup
▪ Check tax implications of the sale well in
advance
▪ Bear in mind that a change of the legal
structure might be advisable
Thomas Meier

11. Value Driver 1: The quality of your business
✓ Legal checkup
▪ Ensure third party contracts are in place and
current, including employment contracts
▪ Check if your IP is secured
▪ Make your company structure or shareholding
simple
▪ Consider buying out minority shareholders
▪ Sort out pending litigation and compliance
requirements
✓ Internal processes
▪ Make sure there is an organisational chart with
clear responsibilities
▪ Check if all internal processes are lean and
efficient enough
Thomas Meier

12. Value Driver 1: The quality of your business
✓ Premises and equipment
▪ Ensure premises and equipment look
neat and modern
▪ Get rid of obsolete stuff
Thomas Meier

13. Value Driver 1: The quality of your business
Compared to renovating a house your cleanup will only take time
Always polish your company with the prospective buyer in mind
Thomas Meier

14. Value Driver 2: The quality of the sales
process
1. Teaser & Long List
▪ List of potential buyers, ideally more than 10 candidates
▪ Anonymised teaser providing some very basic information
2. Short List & NDA
▪ Selection of seriously interested parties
▪ Non disclosure agreement (NDA)
▪ Important to create competition
3. Information Memorandum
▪ Should give a clear picture of your company
▪ Key sales document and a substantial piece of work
▪ You have to accept handing out internal information
▪ Very important: You will not mention a purchase price!
Thomas Meier

15. Value Driver 2: The quality of the sales
process
4. Indicative Offer or LOI (Letter of Intent)
▪ Indicative offer stating a purchase price and describing structure of the deal
▪ The letter of intent is not legally binding for both sides
▪ Buyer will often ask for exclusivity for the next steps
5. Due Diligence
▪ When exclusivity was granted, only one buyer will undertake DD
▪ Maximum should be two or three, as it gets very labour intensive
▪ Information will be provided in virtual data room
▪ Data room allows seller to keep full control over how and when information is
revealed
Thomas Meier

16. Value Driver 2: The quality of the sales
process
6. Management Presentation
▪ Discussion of DD outcome
▪ First contact to management
▪ Potential conflict of interest between seller and management
7. Negotiations / SPA
▪ Share purchase agreement (SPA) outlining the legal details of the deal
▪ Experienced lawyer necessary
▪ Guarantees and liabilities
8. Signing & Closing
▪ Deal gets binding for seller and buyer by signing the SPA
▪ Seller be will bonded to business by guarantees and liabilities for years
▪ Part of purchase price can be escrowed to secure guarantees
▪ From start to signing it typically takes 4 to 8 months
Thomas Meier

17. DIY or get help?
✓ Legal Advice
▪ Highly recommended to hire experienced lawyer
▪ High fees, but less risk for the seller
✓ M&A Consulting
▪ Helps making your business ready for a sale
▪ Makes first approaches, so you might remain anonymous
▪ Prepares IM
▪ Can play bad cop in negotiations
▪ Lets you concentrate on day-to-day business
▪ Should pay off for itself by getting a better deal
✓ Solicitor
▪ Compulsory in most countries
▪ Typically paid by the buyer
Thomas Meier

18. Typical fees of M&A Consulting
✓ Work fee
▪ Pays the M&A advisor’s direct costs during the initial stages,
▪ Flat fee, monthly allowance or hourly rate (not recommendable)
▪ Covers risk that seller pulls out for a reason, advisor cannot influence
▪ Not automatically more work involved to sell a company for 10m than for 500k
▪ Work fee most likely not below 10.000 €, larger consultant firms hardly
interested for amounts less than 100.000 €
✓ Success fee
▪ Range from 2% to 8%, depending from deal size
▪ Lot of success fee models possible
▪ Often work fee can be credited against final success fee
Thomas Meier

19. What price to expect?
✓ Property (real estate)
✓ Intellectual property (IP)
✓ Sources of sales
✓ Market position
✓ Available synergies for the buyer
✓ ‘Make or buy’ for the buyer
✓ Net Asset Value / Debts
René de Jong

20. Things to consider and prepare for SPA
✓ Paperwork
✓ Non compete
✓ Period to stay on and possible earn out
✓ Contingencies
✓ NAV
✓ Postponed payments
René de Jong