The European Commission estimates that around 450,000 businesses are transferred each year in the EU, potentially affecting 2 million workers (based on data prior to 2021). For Economie Réelle, Fabrice Lange, CEO of Actoria and specialist in business transfers, shares his advice on how to manage a more delicate period than it seems.
Know Why You Want to Sell
One crucial element: anticipation. Fabrice Lange, having managed hundreds of transfer cases, is often taken aback by “the number of business owners who approach him without a clear vision of their next steps after the transfer“. This uncertainty, he believes, may hinder future negotiations with potential buyers. “Many buyers hesitate to engage when they fail to comprehend your reasons for leaving the business, potentially casting a negative light on the company“, he emphasizes. Therefore, a personal project should accompany the transfer. As per the 2015 report from the National Association for Business Transfers, 70% of transfers result from retirement, 20% from health issues or life changes, and 10% due to professional reorientation. It’s essential to clarify your situation to potential buyers; otherwise, “they may fear your abrupt withdrawal from the discussions, and bankers often share this apprehension“, reveals Fabrice Lange.
Departing a Mature Company
To execute a successful transfer, strategic planning is as important as psychological readiness. It’s your responsibility to identify the best time to sell your business. “The transfer should align with the company’s life cycle, akin to a product’s life cycle, encompassing creation, development, maturity, and decline“, explains Fabrice Lange. “However, many business owners reach out to us too late, often during the initial phase of decline“. This can be problematic as buyers “are investing in the company’s future“, the expert continues. Thus, selling a robust business, led by a leader who doesn’t show signs of fatigue, is preferred, even though it might be hard to let go of a business that’s operating at its peak. “When you exceed this maturity phase, business leaders tend to plateau. But when you’re no longer innovative, you can quickly lose market share“, observes Fabrice Lange.
Ensuring Thorough Preparation
There are several fine points to address to make the business appealing. “Ensure that all your contracts are transferable and that all shareholders are in agreement with the company transfer“, advises Fabrice Lange. A complex scenario: “If a single customer contributes 80% of your turnover, you’ll need to focus on the business aspect“, to avoid exacerbating the natural suspicion that might arise between your former customer and the new management. According to Actoria’s CEO, a common mistake is to dedicate yourself entirely to the transfer process. Instead, “you should continue to boost your business, pretend that the company is not for sale. If a significant contract comes your way, sign it“.
Proper preparation also includes conducting a company assessment, identifying its strengths and weaknesses, and analyzing its accounts “for at least three years” to demonstrate its actual profitability. Finally, it’s time to compile a presentation document, “a reference document provided to the buyer, which must be a high-quality, aesthetically pleasing, and confidential document“, explains Fabrice Lange.
Selling at the Right Price: Focusing on Margin and Organizational Structure
To obtain an optimal price for your business, you must present an attractive proposition to the buyer. According to Fabrice Lange, “the key element is the profit margin, not the turnover. It’s essential to maintain excellent profitability“. This underscores the importance of boosting your company until the last moment, to continually increase its value in anticipation of the transfer. More subtly, the company’s organization will also significantly influence the valuation. “It’s important not to centralize all decision-making powers in one person’s hands, as the buyer may have difficulties relying on others for future operations“, the expert advises. He believes that “learning to delegate before a handover is critical; it enhances the company’s value“.
Identifying the Best Buyer
Whether you choose to navigate this process alone or enlist professional assistance, it’s crucial to have a selection of potential buyers. “Avoid focusing entirely on the seemingly perfect buyer“, cautions Fabrice Lange. Be wary of investors seeking high returns who pay promptly but may not offer much else. The greatest risk, however, is a takeover by a competitor. “Consider this option as a last resort. There’s a risk of not obtaining a fair price because the competitor is primarily interested in your customer base; they already have everything else.” Alternatively, attempting to find a buyer within your market may raise unwarranted curiosity. “When a company isn’t in the acquisition phase, there’s a high probability of information leaks“, the expert confides.
In any case, according to Fabrice Lange, the rapport between the seller and buyer is crucial. “This applies to shared values, management styles, and methods“. A stark contrast in approach could result in the staff rejecting the new management. Note that, according to the National Association for Business Transfers, in 2014, 45% of small to medium-sized enterprises were transferred to an external structure (30% internally, including one in five within the family).
Preparing for Negotiations
Once you’ve identified a buyer, the negotiation phase begins. It’s important to understand your counterpart and have your arguments prepared. “Your arguments will differ based on whether you’re dealing with an individual risking their savings or a growing company seeking expansion“, explains Fabrice Lange. He mentions that having a professional present could be beneficial to the business owner transferring the company, providing a buffer when addressing difficult subjects. Regardless, strive to maintain amicable relations post-negotiations, as the transition period is imminent.
Managing the Transition
The sale of the company doesn’t mark the end. Fabrice Lange estimates a “three to twelve-month” period for a smooth transition. This period, ideal for transferring knowledge and contacts, also has its own guidelines. “You should consider how to manage remuneration, as many buyers assume that the seller isn’t paid during this period, which should not be the case“, reminds Fabrice Lange. For a harmonious transition, both parties must agree on the schedule for this phase (duration and scope of the transferor’s mission, attendance of both parties, etc.).
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FAQ
What services does Actoria provide?
Actoria specializes in mergers and acquisitions advisory for small and mid-sized businesses. Our services include company sales, succession planning, buy-side and sell-side mandates, business valuation, financial diagnostics, investor sourcing, negotiation support and full transaction execution until closing.
Who does Actoria work with?
We support SME owners, family-business leaders, shareholders, entrepreneurs, private investors, and corporate groups seeking to acquire or divest businesses in Europe and North Africa.
In which countries does Actoria operate?
Actoria has local teams in Switzerland, France, Belgium, Luxembourg, Morocco and Tunisia, and manages cross-border deals across Europe, Africa and the Middle East through an international buyer network.
How many potential buyers are in Actoria’s network?
Our proprietary network includes more than 6,500 qualified industrial buyers, strategic acquirers and financial investors, allowing us to match sellers with high-quality counterparties.
Does Actoria support confidential business sales?
Yes. Confidentiality is fundamental to our process. All discussions, documentation and buyer approaches are handled discreetly to protect the interests of the seller and the business.
What industries does Actoria cover?
We advise companies across multiple sectors, including industrial production, manufacturing, services, IT and digital, healthcare, logistics and distribution, construction, and specialized B2B services.
What is the typical size of businesses Actoria represents?
We primarily advise SMEs with revenues generally ranging from CHF/EUR 2 million to 100 million, depending on jurisdiction and market.
How does Actoria determine the value of a business?
We perform detailed financial and strategic analysis using multiple valuation methods, including discounted cash flows, market multiples, asset-based methods, and sector benchmarking.
How long does a business sale process take?
A standard transaction typically takes 6 to 12 months depending on market conditions, buyer interest, company complexity and diligence requirements.
Why choose Actoria as an M&A advisor?
With over 20 years of experience, a senior advisory team, a structured methodology, and an extensive network of qualified buyers, Actoria delivers independent advice, tailored execution and strong transaction results for SME owners.
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Actoria has swiftly identified the inefficiencies in our company’s processes, proposed optimizations, and implemented them effectively. Furthermore, Actoria has provided outstanding support throughout all stages of our company’s transfer to a group within our industry. This includes preparing our company, identifying potential buyer partners, and negotiating up to the point of the partner’s capital entry. Actoria delivered expert negotiation skills and secured a valuable partner for us.
We were quite anxious to find a solution, as my health was deteriorating rapidly. Actoria’s consultant played a crucial role in the successful completion of my company’s sale. Their involvement was essential in executing this delicate project, as it impacted our daily operations. This project, which was close to my heart and increasingly necessary, was made possible thanks to the decisive momentum provided by Actoria.
First, Actoria conducted a thorough assessment of our company’s strengths and weaknesses, and then suggested incorporating these insights into our management approach to enhance our company’s value. Actoria led this project alongside my entire management team, enabling the involvement of all key personnel, and swiftly implementing a solution that allowed an investor to enter our capital. This was complemented by the inclusion of some of my company’s executives and a bank.
I couldn’t be happier with the result, but I am especially pleased with my decision to work with Actoria. The success of this mission was the direct result of Actoria’s hard work and sophisticated professionalism on my business. From our first meeting through the reasonable preparation process, all phases of the transfer, legal and financial operations were managed by the Actoria team. Their skills were even more evident when the complexities of this transaction were at its peak.
Hiring Actoria made the difference to achieve my original goal and move on to my next professional challenge. Selling a company like AMR in this market has not been an easy task. Actoria has demonstrated perseverance in identifying good buyers with knowledge of my industry in order to continue the development of my business, and has provided professional advice throughout the process.
The company’s sales process was a lengthy and challenging journey. The professional support from Actoria made this endeavor much more manageable. I would like to extend special thanks to the consultants from Switzerland and France for their highly effective collaboration. Your consultants proposed creative solutions during the negotiations, which effectively overcame significant obstacles in order to finalize the agreement. Their experience, knowledge, and professionalism played a crucial role in the success of this transaction.
Business transfer: a factor of economic growth