Internationally active corporations may well be interested in your much smaller company. Can you negotiate at eye level here? Are there any demands in the negotiation process that are rather unusual for a medium-sized company?
Entrepreneurs often ask themselves how to find the right buyer for their company. This question always arises when a family-internal succession is not possible due to a lack of suitable successors.
When looking for an external buyer, one is often confronted with the question of which group of buyers comes into question at all. Is it rather suppliers, customers or perhaps even competitors? Should the group of buyers be of a similar size on the market?
A longlist with all potential interested parties makes it easier for the entrepreneur and his advisor to approach them in a targeted manner. Especially if this list is well researched and structured.
Is it possible that a billion-dollar corporation might be interested in my small and medium-sized business? Especially if the company has a unique position in its regional market, it may be worthwhile to contact a corporate group. This is because corporations often look for market niches as part of a buy-and-build strategy.
Negotiating at eye level ? this is also possible with corporations
Without professional advice from an experienced succession advisor and without a well-established network, it is certainly difficult for the individual entrepreneur to find the right prospective buyers. Negotiating at eye level can also be difficult depending on the size of the prospective buyers.
As a sole proprietor, can you also negotiate with corporations on an equal footing? -Actually unimaginable.
In a recent case, however, with our professional support, we succeeded in selling a small company to a group with a turnover of 16 billion pounds. The company to be sold, on the other hand, had an annual turnover of about 350,000 ? At the same time, however, it was a very successful niche company in the field of real estate services. At first glance, however, these were completely unrealistic ratios that did not lead to much interest on the part of the company.
Unique selling propositions, growth prospects and good earnings prospects also attract large investors
However, the company for sale had some unique selling points. In particular, a very interesting customer structure on the one hand, but also the very high earning power on the other, made the company such a desirable target for various groups from the same industry.
What is important here is the correct, professional preparation as well as a company valuation prepared according to the standard of the Institute of Public Auditors in Germany, which stands up to international standards. Together with an informative company expose, these can open the doors even to supposedly much too large interested parties.
But this is only the beginning. Because communication between corporate groups and small and medium-sized enterprises is often completely different. This starts with the communication, which is often conducted in English with many technical terms. Then there is the fact that such large companies usually have special departments with many well-trained employees for expansion through acquisitions.
Professional support from an experienced succession advisor protects against overly far-reaching guarantee promises.
With the support of an experienced succession advisor, the entrepreneur can ensure that his interests are safeguarded 100 %. In this way, he can actually negotiate at eye level even with significantly larger corporate structures. Even mammoth meetings with highly professional law and tax firms can be survived without much emotion. At the same time, the expertise of a professional succession advisor ensures that the medium-sized entrepreneur does not have to make any concessions that are unreasonable for him. For example, extensive guarantee promises, etc. Even rights guaranteed by law, for example in the German Commercial Code, are often excluded by corporations by means of a formulation in the purchase contract. If you don’t take a close look at this, you may have to deal with additional claims later on. Many a tax arrangement that is convenient for the company buyer is not necessarily favourable for the seller.
Service providers are also eligible.
In this specific case, with the help of the tax advisor who had been associated with the entrepreneur for years, it was finally possible to sell the small service company described above at a price significantly higher than one year’s turnover. In addition, it was possible to obtain an 18-month consultancy contract for the retiring entrepreneur and his wife. Thus, he was able to make his know-how available on the one hand and did not abruptly retire from entrepreneurial life on the other.
About KERN - The succession specialists:
KERN - the succession specialists - are the experts on the subject of company succession, Company sale, generational change in family businesses and company acquisitions in the SME sector.
Founded in Bremen in 2004, the consultancy is represented at many locations in Germany, Austria and Switzerland and accompanies family businesses in all matters relating to business succession and generational change. Through the development of individual solutions for the handover of businesses, the Company sale and purchase ensures KERN - The succession specialists Company values for transferors and successors.
Would you like to learn how to sell your business professionally? Then our free webinar “Selling a business without risk and loss of value”. just the right thing for you. Sign up right now!
Tips for further reading:
Preparing for business succession - 3 practical tips
How do you recognise a reputable business sale advisor?
Selling a business: Why a pure success fee makes it difficult to provide serious advice
Comment: Unresolved company successions endanger our prosperity
Free webinars on business succession
Employee information during the sale of a company
The advisory board in family businesses
Companies with unique selling propositions in the regional market are particularly interesting for corporate groups. As part of a buy and build strategy, they primarily look for market niches. In our case, the company was particularly desirable because of its interesting customer structure and high profitability.
Professional advice is particularly helpful here. This ensures that the interests of the entrepreneur are 100% protected. This takes a lot of pressure off, especially in lengthy meetings. In addition, the company does not make any unreasonable concessions. Contracts in particular should be checked with professional precision. Otherwise there is a risk of pitfalls.
What is important here is the right, professional preparation and a well-founded company valuation that stands up to international standards. Together with an informative company expose, these can open the doors to interested parties who are supposedly much too big. Another point to bear in mind is the difference in communication between corporate groups and small and medium-sized enterprises. This begins with communication that is often conducted in English, including many technical terms. In addition, there are usually special departments with many well-trained employees for expansion through acquisitions.