As a growing startup founder, the time may come when a tempting offer to sell arises. For many entrepreneurs, it is a strategically important decision. Whether and how to accept this offer, follow up, enter into detailed discussions or reject it. This decision is not easy.
After an extensive discussion with business owners, we’ve identified three key factors that can influence this decision.
Address the issue early on with all the founders of the business involved
A company sale or exit can be pending for various reasons. These include financial incentives such as a lucrative offer unexpectedly made by a competitor or strategic buyer from the industry. However, a company sale can also occur due to a desire for new challenges or personal change. Perhaps the business is not developing as expected, so the sale is the better option for the founders. These multiple motives should be made clear to the founding team from the outset. The founding team should have a shared exit strategy or be aware of each member’s exit plans to act quickly when needed.
5 Options in Succession
As an owner, you generally have 5 options when it comes to selling or handing over your business.
Family Handover
You may have the option to pass the business on within the family, either as a gift or as a sale.
Employee Buyout
An employee, partner, or member of management is another option for transferring your business to a new owner.
Full Company Sale
This is the sale of your entire company to a third party. This could be the management of another company, or another company acquiring 100% of your shares. This may involve a strategic buyer from your value chain or a competitor, or a financial investor looking to expand their portfolio.
Asset Deal
In an asset deal, parts of the business are sold under contract. The remainder of the business is wound down. The sold assets are then integrated into the buyer’s company.
Voluntary Liquidation
This is often the last resort when a business cannot be sold. The company is wound down and dissolved.
What to consider when selling the business
One of the first questions that arises when selling a business often relates to the selling price. The company valuation provides an orientation as to what selling price can theoretically be achieved if a suitable buyer is found. Of course, the final purchase price is a matter of negotiation.
Furthermore, the founders define who could be potential buyers and takeovers of the company. What strategic advantages would which group of buyers have, what purchase price and what synergies could be achieved, and what would be the contractual terms that the founding team would like to accept?
If the company is not currently in a competitive and innovative state, it will be more difficult to sell the company. The founding team would consider whether they can allow more time to better position the company, or whether they would also accept a lower purchase price.
Saying goodbye to one’s own company can be an emotionally big challenge. The founding team must ask themselves whether they are ready to hand over the company. It would be a shame to realise only at the end of a sales process that they will not manage to sell the company after all.
When financial investors are involved, the founding team no longer solely decides on the sale and price. Similar to an investor’s entry, they aim to sell the company for a higher return. Often, investors have a say in share purchases, strongly influencing the decision. Selling a business with investors requires careful planning, collaboration, and transparency to align all interests and ensure a successful process.
Every case is different
Each case of a company sale is unique and requires an individual approach. There is no one-size-fits-all solution, as many factors such as company size, industry, motivation of the parties involved and market dynamics need to be taken into account.
A thorough analysis, discussions within the founding team, and, if necessary, the involvement of experts can help determine the best course of action. A tailor-made strategy is the key to success.
Download our free presentation to always have a basic overview of the process. Get informed and be prepared!