Nevertheless, many senior executives are postponing important decisions regarding the transfer of their businesses—and, as a result, often the realignment of their companies. The focus is not on a structured succession plan, but simply on securing the company’s survival. Currently, the COVID-19 crisis is further complicating business succession—there is a fear that the pandemic will drive down the value of companies.
But it doesn’t have to be that way! Because regardless of the pandemic, the following principle applies: The succession process should be carefully planned well in advance so that as many potential solutions as possible can be generated and discussed with trusted advisors. If no suitable internal successor is available, selling the business is often a good solution. According to an internal academic study, the following factors influence the outcome of a sale process:
1. It is important that the shareholder(s) be clearly committed to selling: Succession is typically a major emotional challenge, especially for owners of family-owned businesses. A well-considered decision to sell, along with as rational an approach to the process as possible, significantly increases the likelihood of success.
2. The company’s attractiveness isdetermined by factors such as its financial performance, market position, performance in recent years, and future opportunities. For many investors, a strong management team or a well-functioning second tier of leadership is also an important factor.
3. The attractiveness of the industry —which includes factors such as market size and expected market growth—cannot be influenced by the seller. The same applies to buyer-side factors such as corporate strategy and the timing of the approach. Nevertheless, these factors can influence the outcome of the sale process and should therefore be taken into account when developing the strategy for the sale process.
4.Support from an external consulting firm ensures a structured and professionally managed sales process. This significantly increases the likelihood of success. Key steps include developing the sales strategy, professionally preparing all necessary documentation, personally reaching out to as many potential buyers as possible, and managing the closing phase through intensive negotiations. Attorneys and tax advisors provide support with legal and tax matters.
5. The more focus the seller places on the sales process, the better! Hiring an M&A advisor can significantly reduce the time commitment for the seller. Furthermore, it is important to avoid distractions during the process. An example of this would be unrest among the workforce caused by news of the intention to sell.
6. Thorough preparation is essential for a successful sale process. This includes not only the professional preparation of all necessary documents but also the seller’s emotional preparation for the process itself and preparation for individual negotiations.
7. A key factor in a successful sales process is reaching out to as many potential buyers as possible. This provides the seller with alternatives in case negotiations fail, the opportunity to compare different offers, and an improved negotiating position due to competition among the bidders.
8. If the relationship and collaboration among all parties involved do not function properly, it can be a deal-breaker. Therefore, it is important to establish a good relationship from the outset and to conduct the process and discussions in a transparent and solution-oriented manner. Direct contact between the buyer and the M&A advisor or the seller is advantageous.
9. The seller’s requirements include, among other things, purchase price expectations and willingness to collaborate in the future. As a general rule, the more reasonable the seller’s requirements are, the more potential investors will be interested, and the higher the likelihood of success. The enterprise value calculator from Walther Transaction and macx is ideal for an initial, non-binding purchase price assessment. Using just a few data points, it quickly and free of charge provides a reliable estimate of the company’s value.
10. Last but not least, a prerequisite for concluding a sale is reaching a substantive agreement with all negotiating parties. In addition to agreeing with the buyer on the purchase price and other terms, this may also involve reaching agreements with business partners, banks, customers, or other stakeholders.
There is no guarantee of success, but there are certainly many opportunities to positively influence the outcome of the sale process!
