must anticipate!, Business sale/transmission

ONE term of two to three years it is commonly recommended to prepare the sale of a business. This period makes it possible to anticipate the transfer and intervene efficiently at a structural level.

Carrying out a diagnosis prior to the sale helps to define the axes of work, optimizing sales conditions and predictable deadlines. This the diagnosis must be carried out by an external person for the company, capable of interpreting the situation objectively. […]

Present a clean balance

A buyer will ask to see the last three, or even five, balance sheets to ensure the permanence of a phenomenon and to consider that it is acquired (increase in revenue, stabilization of profitability, etc.). Thus, an increase in turnover last year, after two years of decline, cannot, in itself, attest to a return to growth. It may just be a “stroke of luck” and the buyer can only be convinced with an order book that confirms this element. […]

It is best to “clean up” the last balance sheet before selling your business so that it is clean and in order. Even if the accounts have been maintained perfectly until now, some points may have to be adjusted: ensuring the accuracy of expenses and income recorded in advance, limiting the size of the current accounts of the partners and starting, if necessary, to reduce the amount of reserves (the acquirers do not borrow to buy excess money), check bad customers and provisions, etc.

Everyone knows that it is necessary to restate the manager’s remuneration and several other aspects. However, most acquirers prefer – consciously or not – to see an increasing result rather than increasing manager compensation and a stagnant result. Likewise, certain “benefits in kind”, not necessarily taken into account by the buyer, may increase the result by making small changes in recent years to present optimal profitability. In the same logic, it is easy to consider that certain costs are not “necessary for the activity” but correspond to expenses related to the transferor’s lifestyle. It is easier to convince a buyer if, during the last fiscal year, these costs no longer appear.

Limit enterprise dependencies

The main thing is limit business dependencies aiming to optimize its attractiveness in the disposal project. These are dependencies of different types:

· Manager dependency. The activity must be continued without difficulty in your absence. She should even be able to do without him now and then.

· Dependence on a client. If one of them represents 10%, 15% or 20% of the revenue, the possibility of its exit – with or without notice – is a real obstacle for the buyer.

· Dependence on a supplier. If a supplier centralizes a significant part of the activity, even if it offers guarantees of solidity and stability of its prices, it is essential to reassure the buyer thanks to an alternative plan already activated.

· Dependence on a key man. If an employee is a key person in the organization, an acquirer may see this as a weakness unless alternatives already exist. It cannot be ruled out that this key person does not agree with the acquirer and decides to leave the company after its sale.

· Dependence on technology or production tool. Here, the question for the acquirer is whether the company has the means to ensure its survival in the medium and long term. In fact, heavy investments required to maintain or renew the production tool will have a negative impact on the selling price.



Jean-Michel Huet and Sébastien Dunod coordinated the book “From school to start-up”. The Paths of Education and Entrepreneurship, published by Pearson in November 2020.
– Photo DR/Pearson

WRITERS

>>Jean-Michel Huet is a partner at the consultancy BearingPoint, supporting governments, telecommunications or energy operators in their strategic and digital transformation. >>Sébastien Dunod began his career in auditing, both external and internal, before creating his first company. He is also a coach for business leaders and startups. In 2017, he sold his core business in IT, personal services and training to create PME Partner, a company specializing in the sale and acquisition of VSEs and SMEs. Co-authors: Alexandre Bernardi, Mélissa Etoke Eyaye, Denis Gallot, Olivier Guérin, Delphine Manceau, Adrien Perrot, Etienne Pouget, Nathalie Rodary, Jean-Edern Rougagnou.

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