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Startup Exit: Selling the company or not?

Startup Exit: Unternehmensverkauf oder lieber doch nicht

As the founder of a well-growing startup, there comes a time when a tempting offer to sell the company is on the table. 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 in the Konsultori, we summarise three crucial issues that can provide an impetus in 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. But a company sale can also happen because of a desire for new challenges or a personal change. Perhaps the business is not developing as expected, so the sale is the better option for the founders. These many motives should be made clear in the founding team right from the start. The founding team needs a joint exit strategy or should know the exit scenarios of the individual(s) among themselves to be able to act quickly in the appropriate case.

If one wants to exit oneself, there are several scenarios for how a company sale can proceed

The founding team has the option of handing over the entire company to a strategic acquirer as part of a merger (an amalgamation of two companies) or an overall company sale. Of course, if there is interest, it is also possible to pass the company on within the family. A management buyout is when employees from the company itself make an offer to buy the company from the current owners and continue to run it themselves. If no suitable buyer or transferee can be found, the company is closed and wound up. If you know in advance that a sale of the company is planned, then you will scan the individual possibilities at an early stage and prepare for it.

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 realize only at the end of a sales process that they will not manage to sell the company after all.

If a company has financial investors on board, the founding team no longer decides alone whether to sell the company and at what price. It is like an investor’s entry that they want to sell the company again to get their investment back with a higher return. In most cases, the investors have already been given a say in the purchase of the shares, and this has a strong influence on the decision. Selling a business with investors requires careful planning, cooperation and transparency to ensure that the interests of all parties are taken into account and that the process is successful.

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 get a basic overview of the process. Get informed and be prepared!