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.
If one wants to exit oneself, there are several scenarios for how a company sale can proceed
The founding team can choose to sell the entire company to a strategic acquirer through a merger or full company sale. Of course, if there is interest, it is also possible to pass the company on within the family. A management buyout occurs when employees offer to buy the company from the current owners and take over its management. If no suitable buyer or transferee can be found, the company is closed and wound up. If a company sale is planned, it’s important to explore all options early and prepare accordingly.
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.
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