You have spent years building your business. Have you ever thought about the time when you pass on the torch?

No doubt you want to leave your life’s work to the right person. How can you prepare for the sale or transfer of your business? We discussed this with three of our partners and members of UPIC, the Professional Union of Intermediaries in Business Transfers. Thierry Dehout of Closing, Tanguy della Faille of FB and Matthieu Geelhand of Dealmakers (Moore Group) give us their specialist advice.

 

FIVE GOOD QUESTIONS TO ASK YOURSELF

« Is this the right time to sell my business?»

Is your business fully developed? Is it the right time in terms of the market and economic situation?

« What is my business worth objectively?»

What is the market value? (Note: value does not equal selling price)

« Is my business suitable to be sold? »

Should the scope of the sale be changed?

« What are the strengths and weaknesses of my business? »

What should be retained or improved to strengthen the business?

« s this the right time for me? »

Are you psychologically ready to hand over management to someone else? Will the returns from the business enable you to maintain your standard of living?

 

THIERRY DEHOUT                     TANGUY DELLA FAILLE           MATTHIEU GEELHAND
Partner at Closing                               Managing Partner at                 Partner at Dealmakers                                                                                                                                                                      FB Transmission

ANTICIPATE AND PLAN AHEAD

The sale or transfer of a company is an important moment in its existence. For Tanguy della Faille « should this phase be part of the strategic concerns of every business leader. It is an issue that should be kept in mind from the moment you start your business. It is important to anticipate, not to undergo the transfer but to manage it properly. You must avoid being pressured by illness or economic problems. Hence the importance of starting the process when everything is going well».

Matthieu Geelhand shares this view. « It may be a cliché, but it is better to start preparing to sell or transfer the business before you have had it. That does not create the best conditions and that will be reflected in the company’s figures, in overall motivation and in the atmosphere with the staff. You also have to factor in the preparation time, the transfer itself and the coaching period after the transfer. ” Altogether, the manager spends almost two years of their life on the sale or transfer process».

On the more concrete aspects, Thierry Dehout believes that selling the business should be seriously considered some two to three years before taking the plunge. « The transfer process itself takes a hefty year on average; to prepare everything, find the buyer, negotiate and complete the transaction. It is better to prepare in advance because there may be things that need to be changed in the business before the sale, » he explains. In family transfers, this can take even longer: between five and 10 years. « n an intra-family context, preparing the successor is a lengthy process because they have to go through different levels of the company and acquire all the skills of the business manager», explainsThierry Dehout.

 

THE IMPORTANCE OF VALUATION

First of all, it is wise to assess the value of the business. « It is important to have a clear vision of the value and structure of the operation», explains Tanguy della Faille.

« Thanks to an objective valuation report of the company, the entrepreneur knows exactly what its value is on the market», Matthieu Geelhand adds. He also reminds that the value of the company is not identical to its selling price.

« It is important to assess your business financially and qualitatively» adds Thierry Dehout. « You have to check the quality of your customer portfolio, your products and your organisation.» The advantage? «Weak points can be corrected. Strengths can be strengthened to extract additional value from the company» he stresses. In a nutshell, a good management tool.

 

CONSIDER A TRANSFER WITHIN THE FAMILY

To ensure the long-term survival of your business, it may be a good idea to first consider a transfer within the family. « One of my first questions is always whether the children want to take over the business»,  says Matthieu Geelhand. « Start by asking this question just to be sure. It would be a shame to find out in the middle of the transaction that you could also have chosen a successor from among your sons or daughters.»

« If you have already found a successor within the family, the preparation is slightly different, in the sense that it is an internal preparation » says Thierry Dehout. « There is no need to take time to prospect. On the other hand, it is not only necessary to evaluate the company, but also to determine what skills the successor needs to acquire to take over the business. »

 

How does this process work in practice?

« n a family transfer, the process is often less formal», explains Tanguy della Faille. « It is still a good idea to draw up a plan in several stages and follow it as strictly as possible. The negotiations will also be different» he adds, « probably less aggressive and more amiable in a family setting. »

 

PREPARING TO SELL THE BUSINESS

To face the sales process with peace of mind, Matthieu Geelhand advises that one makes himself as indispensable in his business as possible. « Therefore, it is also advisable to plan several years ahead.» He gives an example involving the commercial aspect. « f, as a manager, you spend 25% of your time on commercial prospecting, it is better to hire a person who specialises in it and can devote 100% of his time to it. Of course, this comes at a cost. But afterwards, this new person will generate sales that will cover the costs and even generate profits for the company. This applies to all departments. You have to agree to make investments today that will pay off in a few years’ time, upon handover.»

 

Specifically Tanguy della Faille first draws up a complete dossier for prospective buyers. « It consists of a memo presenting the company anonymously, because we work in confidentiality. We gather all essential information about the company before even contacting potential buyers.»

 

« Then, once you have found one or more interested parties, you have to negotiate the sale of the company» explains Thierry Dehout. « This is the moment when we discuss the price, the payment terms, the guarantees the seller has to give, the conditions of support (or not) for the seller. The transaction has to be successful for both parties» he adds.

 

At the end of negotiations, the last important step is the letter of intent. For Tanguy della Faille, « Is this the tipping point between the search for candidates in all directions and a new phase of exclusive negotiations between the seller and the buyer. After the letter of intent, we focus on one candidate. The letter of intent also specifies all the elements needed for the transaction to go smoothly. »

 

FINDING THE RIGHT PERSON

It is not always easy to determine who will be the right person to take over the business. « That is why the preparatory phase is crucial » stresses Tanguy della Faille, « because it allows us to get to know the strengths and weaknesses of the company. This allows a profile of the prospective buyer to be drawn up.»

 

« How do you pick the best person to take over your company? » asks Matthieu Geelhand. « By having the choice! The right person can be found among private investors, competitors, suppliers, customers, staff members, investment funds or family offices. It is important that the seller can choose between different solutions and different buyer profiles.»

 

ADVICE FOR ENTREPRENEURS

As final advice, Matthieu Geelhand suggests preparing psychologically. « During a sale or transfer, the manager wears two hats. The CEO’s hat, because they have to keep the company thriving, and the seller’s hat, to manage the sale. Half of our company visits take place in the evening or on weekends. It is exhausting. If you are not well prepared or your workload is too heavy, you risk burnout. And don’t underestimate the importance of emotions: you are selling your company, your baby. All this has to be taken into account.»

This is confirmed by Thierry Dehout: « Making the end of your career a success is a real job, a project in itself. You have to be able to delegate and make sure the company can function as normally as possible after you leave. This is not something you can decide overnight. You also have to be able to accept that the successor will run the company differently.»

Finally, Tanguy della Faille reminds us that the sale or transfer is a crucial phase for the company itself. « It is a delicate process, but also a normal and inevitable phase in the life of a company, because no one is forever. Ultimately, properly managing the sale or transfer of a business is the best gift the manager can give to his or her company and staff. »

 

 

 

Article from Bank Van Breda’s magazine ‘En Clair’, December 2022