10 tips to follow for a successful transfer of an SME
Numerous traps are in front of the company manager who wishes to sell or transmit his company. Actoria has identified the ten mistakes to avoid when selling your company to optimize the human and financial conditions.
We have grouped them around three pieces of advice: support, preparation and proper conduct of negotiations.
First of all, we recommend to be accompanied in the sales process and to know how to delegate for your own interest:
- Delegate to develop
This allows us to continue to work on the development of the company while the negotiations are taking place. The creation of value is not interrupted. Your market continues to be buoyant and the company remains capable of further improving its turnover and gaining market share. Moreover, your ability to stay in charge proves the reliability of the company and increases the confidence of the candidates in buying a successful company.
- Delegate for better casting
By choosing to work with an M&A consulting firm or an investment bank, you are choosing to trust experienced professionals. With a European network of 8,000 buyers, Actoria allows you to distribute your offer to a large panel of entrepreneurs and candidate companies through a multi-channel approach. Moreover, the professional experience of our consultants allows us to select the candidates with the appropriate professional profiles and financial capacities.
- Delegate to protect
Confidentiality is an essential part of the sales process. In your market, making your projects public can weaken your company in front of your competitors, suppliers and customers. It can damage the reputation of reliability of your products or services over time and thus divert your customers, essential value of the final transaction. Moreover, by placing yourself in the front line with the different actors of the transaction, you make your steps public in the eyes of your competitors.
- Delegate to prepare the transition
If it is not advisable to discuss your decision to sell the company with all the employees at first, you should not isolate yourself within the company but rather place and organize men (or women) for the management of the company or relays of decision and skills. Indeed, they will support you during the difficult moments linked to the transfer and more importantly they will be precious during the transition with the new management team. Thus, this new organization will increase the final value of the transaction.
The second type of error that is often encountered during a transfer process is the lack of preparation.
- Prepare yourself
Selling your company is a delicate act since it represents for you the successes and difficulties that have marked your professional career over the past years. It is then a question of managing as best as possible emotionally, this major moment which will condition the continuation of the events. The selling entrepreneur knows a certain emptiness in his agenda. The worries and difficulties related to the management of a company can create a void for yourself with consequences for those around you. Therefore, prepare yourself psychologically and think about your future challenges and activities once the transfer has taken place.
- Preparing the company
Just as you have always been able to market your products and/or services, it is now a matter of making sure that your company presents itself in the best possible light to attract numerous and relevant takeover proposals. To do this, you must put together a solid and relevant presentation of your company to show the strengths, weaknesses and possible areas of development of your company in order to be armed during negotiations. This reflection could lead to so-called strategic advice on reorganizations and improvement of weaknesses detected before the transaction.
- Preparing for the aftermath of the sale
The value of the business at the time of the transfer depends on the risks incurred at the time of the transition for the buyer. Thus, the transferor must clear up any friction in order to increase the value of the transaction by avoiding that the change in management affects relations with the customers, suppliers and employees of the transferred company. it is customary for the transferor to stay for a certain period of time to facilitate the transition.
It will also be necessary to anticipate and optimize the fiscal and patrimonial aspects of the operation in order to reduce the final taxation to a maximum.
Finally, the way in which the negotiations are conducted will be a determining factor both in accelerating the timing of the transaction and in setting the final price.
- Do not hide anything
The various candidates selected to take over your company need to have access to all the financial and legal documents in order to move forward in the sale process. The fact of revealing elements progressively is to your advantage and allows you to preserve the confidentiality of the operation. The fact of being honest about the presentation of your company is a sine qua non condition for successful negotiations. The slightest doubts during the different stages of the process will slow down or even cancel the sale process.
- Demonstrate flexibility
The demands of takeover candidates can be numerous. Taking over a company is not a trivial act. The buyer must be sure to make the right choice and to move forward in complete serenity. It is therefore advisable to provide them with all the documents they need to accelerate their decision and their steps. A transition period is often desired to accompany the handover between the two management teams, so the fact that you are available to help the buyer to develop the company allows you to enhance the offer and your relationship with the buyers.
- Do not rush into signing inappropriate papers. (L.O.I, exclusivity, promise)
When the best possible buyer is found, it is recommended to accelerate the tempo of the last steps, especially when the search for candidates has been long. Four documents will then punctuate the progress of the sale process. The letter of intent (L.O.I) to be legally bound while being able to slow down the discussions at any time, the memorandum of understanding which ratifies the sale price, the guarantee of liabilities to face possible debts prior to the sale which would appear, and finally the deed of sale which completes the sale process with the transfer of the shares called “Closing”.
Here too, being accompanied will allow you to face all eventualities in this legal field.
Here are the recommendations and mistakes not to make when you have decided to approach this process of transferring or transmitting your company, which is an act as important as the creation and life of the company, previously experienced by yourself as a company director.
Luc BRZUSTOWSKI Partner Manager Rhône Alpes
Martin COSTANTINI Junior Actoria Paris
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