Every year, more than 70,000 business owners in Germany look for an suitable successors. And every year numerous Prospective buyers with sufficient financial strengthincluding strategic investors, investment companies, family offices and individuals for suitable companies. Nevertheless, both sides find the search for the ?perfect match? predominantly difficult and protracted: Why is this so? How does the search for a buyer succeed?
Aspects of the buyer search
The Company sale of one’s own company is a first and unique process for many sellers. Although they are well acquainted with the operational and strategic concerns of their company, they are overwhelmed with the compelling change of perspective that the sale of their own life’s work requires. As a rule, the sale of a company is not a fungible asset, but a complex, evolved and individual entity. It is not uncommon for there to be a lack of knowledge of a structured, optimal procedure in the search for qualitatively suitable company successors. If, on top of that, day-to-day business ties up the owners’ capacities, the elaborate, professional search for a suitable successor quickly fails for reasons of time or is postponed altogether. And last but not least, entrepreneurs are rightly extremely sensitive when it comes to disclosing the intention to sell. After all, making it known that a company is being sold can have a negative impact on relations with staff, customers, suppliers or financing banks.
Unsystematic approach to selling a company does more harm than good
In our many years of experience at KERN Company Succession. Successful. we often observe that owners who are willing to sell often approach the search for a buyer unsystematically. They only involve trusted people from their known circle in their sale plan, but they do not necessarily have the experience, networks and other possibilities to initiate a professional, systematic search for a buyer. A random approach, however, carries the risk that the sale will fail, take a disproportionately long time or not achieve the highest price.
So how do I proceed systematically as an entrepreneur in my search for a suitable successor or company buyer?
Targeted approach to finding a buyer for a company sale
First of all, it is advisable to draft a neutral short description of the company, the so-called ?company teaser?. This should contain the key data of the company. This includes the product portfolio, market segment, customer structure, region, turnover and earnings situation. But it should also include the legal form, the amount of shares to be sold, the type of transaction envisaged and the special features of the company. In addition, it makes sense to give an indication of the expected purchase price or the method of determining the purchase price in the short description. The company is thus described in the short description for the sale of the company with its essential characteristics.
Important: Anonymised short description
However, the company must not be identifiable from the short description. Details of the company name, website or the like and special characteristics that enable the company to be identified should therefore be avoided. Otherwise it would become apparent on the market that a certain company has already been offered for some time, respectively at a certain purchase price, without the company having been sold. And this can negatively influence the perception of saleability or value. Furthermore, the announcement of the intention to sell can trigger the aforementioned consequences among employees and business partners. And this without the chance of professional communication with these important stakeholders. In addition, possible buyer target groups should already be defined in this phase. For example, in addition to strategic investors, investment companies, family offices and external individuals, are members of the existing management also suitable company successors? Or should competitors be considered as possible buyers? Are there any antitrust regulations that might prevent the purchase?
The brief description is the essential basis of the buyer search and serves as initial information for potential buyers or multipliers in a company sale.
Placement of the short description for company sales in networks
Professional business succession advisors continuously maintain their extensive network contacts with the relevant multipliers. These include banks, associations, law firms, tax advisors, strategic investors, financial investors and individuals willing to buy. These advisors can place the brief description specifically in their contact networks. This typically increases the prospect of generating high quality interest within a short period of time. Such a placement is coordinated by professional advisors with the company seller beforehand. In this way, certain groups of buyers are included in the process or excluded from being approached.
Placement of the short description in company exchanges
Independently of this, you can consider posting the neutral short description on one or more relevant company exchanges. In Germany there are a large number of company exchanges run by different operators. In addition to nationwide exchanges, there are regional exchanges and special exchanges for certain sectors or professional groups (e.g. tax consultants and engineering offices).
Brief overview of the most important company exchanges
The company exchange ?nexxt-change? operated by KFW and the Federal Ministry of Economics is the largest company exchange in Germany. On this platform, which is free of charge for transferees and transferors, most advertisements for company sales and company searches can be found. In general, there are more smaller commercial and trading companies as well as catering businesses here than medium-sized and larger companies. Offers can be posted free of charge by both sellers and prospective buyers. Therefore, some advertisements are no longer up-to-date because they are not professionally maintained.
The ‘Deutsche Unternehmerbörse’, operated by the Handelsblatt publishing group, is fee-based for sellers and buyers. Typically, the offers contained here are up-to-date. There are significantly more offers from medium-sized and larger companies for the sale of companies.
We at KERN-Unternehmensnachfolge. Successful. have used our many years of market expertise to develop our in-house Company exchange established. This exchange presents all exclusively managed mandates of the D-A-CH-wide locations of the KERN succession advisors and also offers “full-service support”. Every offer for sale and every candidate application is checked in detail before it is activated. KERN has over 110,000 verified investor profiles in its network who are looking to buy companies in the SME sector.
Few company exchanges offer decisive advantages
The advantage of supervised company exchanges is to generate greater publicity for the offer. However, if a company exchange is not accompanied in terms of quality and content, the search for buyers is made more difficult and suitable demand may not be generated. For example, this may lead to contact with prospective buyers without sufficient equity capital or without sufficient experience. In addition, care should be taken to ensure that it is not transparent to attentive observers how long a particular or identifiable company has been ‘on the market’. Practical experience shows that company exchanges can be a good supplement in the search for a suitable successor. However, succession advisors can often already identify higher quality demand directly and discreetly through their networks without the need to post the offer on a company exchange.
Another, important advantage of involving business succession experts is also that they can answer prospective buyers’ initial questions about the company. This preserves the anonymity of the seller and he himself does not have to appear outwardly recognisable at this stage. The advisor also acts as a filter for the seriousness, suitability and capital resources of the prospective buyers.
Go through the checklist before posting on a company exchange
Confidential information about the business being sold should only be disclosed after
- of such a quality check
- express release by the seller
- Signing of a non-disclosure agreement (?NDA?)
be issued to interested parties. A Professionally prepared company exposé facilitates this phase of the process considerably. This contains the name of the company, a detailed description of the product portfolio and the relevant market environment in which the company operates, as well as key financial figures, etc. The company exposé also usually includes a company valuation according to the currently valid standards. As a rule, a company valuation according to the currently valid standards is also part of the company exposé. When preparing the contents of the exposé and the form of presentation, succession experts can help with their experience from a multitude of other projects. Both the targeted approach to networks and the use of company exchanges generate a great deal of effort in the follow-up. This includes initial discussions with prospective buyers, checking the seriousness of the enquiry as well as its professional and financial background, checking the buyer’s objectives and wishes, answering questions, etc. Experienced succession advisors can professionally relieve the seller in these fields of activity.
Ergo: The systematic search for a buyer pays off for a company sale
The systematic search for a buyer, i.e. the search for a suitable successor, involves identifying, approaching and selecting prospective buyers. This represents one of the greatest challenges for the company seller. The success and existence of the company, jobs and the achievement of an optimal purchase price depend on it. A systematic search for buyers generates a greater and qualitatively higher demand and thus helps to maximise the proceeds of sale and ensure the continuity of the entrepreneurial work.
The advantages of engaging professional business succession advisors in the search for a buyer are summarised:
- Systematic, targeted search for a suitable successor involving their extensive networks
- Stock of a well-maintained own pool of interested parties willing to buy
- Preliminary screening of prospective buyers according to suitability, seriousness and financial strength
- Discretion, maintaining anonymity of seller and company
- Time and cost savings, relief for the entrepreneur
- General increase in the probability of success
- Structured process support and negotiation facilitation
- Optimal legal and tax support
A professional search and selection of prospective buyers for the sale of the company form a good starting point for the successful implementation of the subsequent steps in the sales process: initial talks with prospective buyers, company inspections, examination of the company by prospective buyers Due diligence, Letter of Intent, purchase price and purchase agreement negotiations, signing and handover of the company.
We will be happy to tell you which individual measures need to be taken to systematically find a buyer for the sale of the company and how these can be coordinated with each other: +49 2151 9378378 or by e-mail to: knuffmann@kern-unternehmensnachfolge.com
TIPS for further reading:
German Brand Award 2021 Award for KERN company succession
Calculate company value: It’s that easy
How targeted balance sheet adjustments can increase the value of a company
