The most correct approach when selling your own company is to understand the most important steps leading to a successful transaction, which are necessary to meet both the seller’s requirements and the the buyer’s interest. In (international) practice, there is an established standard how transaction (sale of company capital or assets) should look like, regardless the exceptions that obviously exist in local practice. The priorities should be:
- Determining the seller’s goals. The seller should have a full understanding whether he (or she) wants to completely leave the ownership of the company or find a partner for the next period; what he/she wants to do in the future; if he/she wants to retire; what his or her structure of future income and assets will be like Each subsequent step is conditioned by giving answers to these questions.
- Determining the value of the company. Before taking the first steps towards selling a company, it is necessary for the seller to be aware of the value of the company and that awareness should correspond as much as possible to the value of capital determined by financial experts that apply appropriate, internationally accepted methods of capital valuation. If the owner’s view about the value of the company differs materially from the assessment made by experts, it is a clear signal of an (un)successful transaction.
- Preparing the company for sale. It is often said that first impression can be made only once. The company may have solid financial performance and market position, which is the basis for determining the value of the transaction, but on the other hand it is possible that due to legal, financial, tax or commercial non-compliance with industry regulations or market standards, there could be risks that the potential buyer simply does not want to take.
- Sales strategy. Determining how the company will be sold is important. You can offer the company on the market through specialized financial advisors, but also independently (by contacting potential buyers, usually from the same industry, without intermediaries). This decision will largely determine the further course and success of the potential transaction. What is important to know, if you are a seller, is that the buyer is likely to have his own external team of advisors, and therefore, it is important for you, as a seller to have advisors too, so that adequate dynamics and quality of negotiations can be achieved.
- Preparation of company presentation. With an aim to adequately inform potential buyers about a certain company, its details and the intention to offer it on the market, it is necessary to prepare preliminary data on the previous, current and future business performances of that company. It is common practice that in initial communication with potential buyers, the name of the company that is offered, is unknown (not discovered), but this may not be the case. Certainly, after the initially expressed interest of the potential buyer, it is necessary to disclose the company’s name.
- Agreement as the basis of the future transaction. This phase includes obtaining bids, selecting them, preliminary negotiations and formalizing the basis of the future transaction. It is common for the buyer and seller to agree in advance on: the property to be purchased (percentage of the company’s shares or stocks), the financial framework of the transaction, the property that may not be the subject of the transaction, the due diligence period, the closing time frame, that is, the time of finalizing the transaction etc.
- Due diligence analysis. Due diligence analysis or depth analysis of the company that is the subject of the transaction is a mandatory phase of every sale. Usually, legal, tax, financial and commercial due diligence is performed by qualified, external experts, including experts employed by a potential buyer in order to identify and quantify the risks that exist in the business of the company which is on sale, as well as its real performance.
- Signing the sales contract. In case of a positive outcome of the previous steps, a sales contract should be concluded between the buyer and the seller, which comprehensively regulates the relationship between the two parties related to the transaction. Sometimes the signing of the contract will mark the end of the sale process, and sometimes the contract stipulates certain conditions which the seller (or less often the buyer) has to additionally fulfill so that the transaction could be realized and the buyer could take the ownership of the company.
- Integration. Probably the most underrated step of any transaction is the integration of the acquired company into the corporate structure of the buyer. The degree of integration will mostly depend on whether the buyer is a financial investor (investment fund or similar) that will not primarily insist on this step or it is a strategic investor (industry company) that will aim to make the newly acquired company take over the majority of the existing standards and business procedures on the group level. Cultural integration of the two companies, should be considered an important issue, because in practice, it turns out that this is often the biggest post-acquisition challenge. This aspect of the transaction will be mostly influenced by adequate internal communication, primarily with employees, but also by the fact whether the previous management continues to manage the company or a new management will be appointed.