Selling a business

Selling a business is an emotional event for many people. In addition, the sale has all kinds of financial and tax implications. Careful and expert guidance with sufficient preparation time is therefore important.

Actually, it is best to always have your business ready for sale. That means, among other things, that all contracts are well documented. The company structure is completely in place. Assets are in the right place within the structure. The organisation can also function without the entrepreneur. But also that there is some awareness of the financial and tax implications.
If your company is not yet ready for sale, you should actually take the first steps ten years before a possible sale.

Once a sale becomes more concrete, it makes sense to get an idea of the value of your business. Just looking at the equity on the last balance sheet or unsubstantiatedly weighing up the profit and/or turnover a few times does not lead to a realistic starting point for entering into a conversation with a potential buyer. A good accountant, corporate finance expert or registered valuator, can be helpful in the valuation process.

Based on this, it is important to draw up (or have drawn up) a sales memorandum. This contains the most important details of the company. A buyer can be sought on the basis of such a sales memorandum. Initial negotiations can also take place on its basis.
Successful negotiations often first result in a letter of intent (LOI). When such an LOI is too concrete on the essentials of a purchase agreement, a sale has actually already been concluded. Drafting the LOI should therefore be done with care.

If and as soon as information is made available to a buyer, it is important to conclude a "non-disclosure agreement". On this basis, the candidate must keep the information obtained confidential.

The final negotiations involve, among other things, deferred taxes. But also possible claims, the quality of your employees and debtors, past decision-making processes, the ownership position regarding assets. What about long-term contracts. The more unclear or uncertain something is in a buyer's eye, the more it will depress the price.

Family transfers often involve a lower value than sales to a third party. The question is how that carries over to other family members. These are often emotional issues, which incidentally can also come into play when transferring to others. The more emotional you operate in the process the more objective advisers need to be. So choose them with care.

After the letter of intent has been signed, a potential buyer will want to gain an even better understanding of the business. This is usually done with a so-called "duedilligence study" in which all value factors are discussed. Such an investigation is often facilitated by providing a virtual or otherwise "data room". All documentation relating to the company is then made available to a potential buyer. It is important to be complete here, so that later in the purchase agreement the guarantees to be given are correct.

In many cases, the purchase price will be further determined on the basis of the due diligence. Subsequently, the purchase agreement will be drawn up. This will specify, among other things:

• who the seller and buyer are;
• what is being sold and when delivery will take place;
• what the purchase price will be, or how it will be calculated, as well as how the purchase price will be paid;
• what guarantees will be given, to what extent and for what duration;
• whether the seller is to remain involved in the business and for how long;
• non-competition clause.

In the case of shares in a BV or NV, the purchase agreement is often referred to as a "Share Purchase Agreement" or "SPA".

Eventually, delivery then follows. This is the moment when everything is effected. This is also known as the "closing".

For more information on business transfers, non-disclosure agreements, LOIs, SPAs, delivery and its accompaniment, please contact us. We will be happy to help.