
It is legitimate to ask how is it possible to transfer the business to yourself?
You are the owner and manager of your company, you are between 40 and 55 years old, your assets consist of a main residence, a nice car and a second home?
Do you want to enjoy the fruits of your labour and keep your business?
An owner buy out (OBO) is intended for owners of healthy, profitable SMEs with good visibility.
But how do you actually transfer the business to yourself?
Conditions:
– The company must regularly pay dividends to the holding company in order to repay the loan taken out on this occasion without compromising its development objectives.
– The loan repayment must not exceed 50% of the company’s profits
HOW?
An OBO is an arrangement for the sale of a company which is carried out with the owner himself in the context of an operation to acquire a company or companies through bank debt.
The OBO (owner buyout) is what is known as a “double trigger sale” because it allows the company to be sold to itself in two stages:
First trigger:
– The company’s shareholder manager creates a holding company that will take over 100% of the company’s capital.
– Thus, the company’s shareholder-manager brings the company’s social rights to the holding company, he holds a part of the capital in a minority or majority way according to his choice, most often alongside capital-investors.
– The capital investors may be minority or majority shareholders, but generally speaking they are minority shareholders because they want a return on their investment and not to participate in the management of the company.
– The payment of the company by the takeover holding company will be made by the equity contribution of the investor-capital and by the debt contracted by the holding company.
– The shareholder-manager continues to run his company and is a substantial shareholder-manager of the takeover holding. In other words, he remains a shareholder manager and benefits from the liquidity of the sale of part of the shares to the persons who have entered the capital of the holding company.
Second trigger:
– the shareholder-manager will be able to benefit from the added value of his company when he resells his shares.
The common objective of both parties is the development of the company in order to resell it in the medium/long term. Generally, the capital investors commit themselves for a minimum of 3 years (minimum to recover their investment) and for a maximum of 7 years.
Exit of the financial partner
There are several ways out for the financial partner(s):
– Takeover by the owner himself with other financial partners (secondary LBO)
– Sale to an industrial group
– Listing on the stock exchange
It should be noted that the choices and conditions of the exits are discussed and fixed at the time the OBO is set up.
WHY SELL THE COMPANY VIA AN OBO?
It is an operation that allows the shareholder manager :
– To transform part of his professional assets (the company) into personal assets (cash) while continuing his activity and remaining a significant shareholder in his company.
– To bring in members of your family in the capital to prepare the transfer of your company.
– To bring other people into the capital: employees, capital-investors.
Key success factors :
– Commitment and motivation of the manager
– Real business project with attractive financial prospects
ADVANTAGES
The OBO is the least risky form of LBO because there is no real change in ownership and management. This is the reason why this operation is attracting more and more interest from owner-managers as well as from capital-investors.
– This technique allows for managerial continuity of the company, which reassures the banks for the raising of debt.
– There is a patrimonial interest for the manager who secures part of his professional assets as personal assets.
– In the absence of a possible transmission through the family or internally, the OBO gives the manager the possibility of choosing a manager, putting him in place and training him to transmit the business.
EXAMPLE: BRINGING A FAMILY MEMBER INTO THE CAPITAL
Let us take the example of a company valued at EUR 2 million that is entirely owned by its director. The latter wants to carry out an OBO to “liquidate” 50% of his shares and, at the same time, bring his daughter into the capital.
He then creates a holding company to hold 100% of the shares of the SME. He then contributes 45% of his shares to this holding company, thus giving the special purpose vehicle a capital of EUR 900 000.
His daughter contributes EUR 100 000 to the capital of the holding company, which then totals EUR 1 million. With this million euros of equity, taking into account the ratios accepted by the credit institutions, the holding company can then borrow 1 million euros from the banks over seven years.
The holding company uses the money from this loan to pay the manager the remaining 50% of the shares in cash. At the end of the arrangement, the manager still owns 90% of his SME via the holding company, and his daughter 10%.
BEWARE OF ABUSE!
– This particular arrangement is often used to recover cash and/or to bring in new shareholders such as members of your family, employees or capital investors into the company. Therefore, if the distribution of capital has not changed, it is possible that the tax authorities will consider it as an abuse of tax law.
– If you overestimate your company, the financial set-up may be strained and you risk weakening your company.
The group in short :
Every year More than 30 successfull transactions with 20 Senior Consultants and Partners On companies with 5 to 100 employees With a turnover of 1 to 100 Million
We are located in many countries in Europe and Africa to provide access to foreign buyers/investors:
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Actoria has allowed me to quickly diagnose the dysfunctions in the processes of our company, to offer optimizations and to implement them. Actoria has also successfully supported us in all phases of our company’s transfer to a group in our sector: preparation of my company, identification of buyer partners, negotiation up to the entry of the partner’s capital. Actoria brought us negotiation expertise and found us a good partner.
We were relatively anxious to find a solution because my health was deteriorating rapidly. Actoria’s consultant allowed me to successfully carry out my company’s sale. Its action has been crucial to carry out this delicate project because it involved all of our day-to-day activities. This project was close to my heart and was becoming increasingly necessary. The impulse given by Actoria was decisive to make it happen.
First, Actoria made an effective diagnosis of the strengths and weaknesses of our company and then proposed to take them into account in our management in order to increase the value of our company. Actoria led this project with my entire management team which made it possible to involve all the operatives and to be able to quickly implement a solution to enter the capital of an investor supplemented by the entry of certain executives of my company as well as 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 has been a very long and difficult journey. The professional support of Actoria made this effort much easier. I would especially like to thank the consultants from Switzerland and France for their very effective collaboration. Your consultants proposed creative solutions during the negotiations to effectively overcome significant obstacles in order to conclude the agreement. Their experience, knowledge and professionalism contributed to the success of this transaction.
The group in short :
Every year More than 30 successfull transactions with 20 Senior Consultants and Partners On companies with 5 to 100 employees With a turnover of 1 to 100 Million
We are located in many countries in Europe and Africa to provide access to foreign buyers/investors:
The question of selling a business in France arises sooner or later. How to find the right buyer in Europe ? How to successfully transfer my business in Europe ? When you want to hand the hand over to a successor, buyer, buyer or investor, the terms used are various: delivery company Europe, sale company france, sale company Europe, sale company Europe, sale small business in Europe. Whatever the terms used for the sale of your company in Europe, you can put your company on a list of companies for sale in Europe, a business exchange, or seek advice from a fusacq, a specialist in business transfer in Europe. With him you can think about the best buyer: family,employee, investment fund, external buyer. Sometimes it can offer you other solutions such as a getting closer to a company, a merging or establishing an alliance with another european company.
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