Preparing Your Company Before Selling: Key Success Factors

Selling a company in which you’ve invested so much is always a complex moment that requires a great deal of insight. Properly preparing your company before selling it involves considering your employees, allowing them to navigate this challenging time with maximum serenity. Choosing to sell your company is one of the most significant decisions in an entrepreneur’s life. Prior to the sale, the leading shareholder must ask the right questions to optimize the process.

Why Sell?
Understanding the motivations behind the sale can guide the exit strategy toward a specific type of structure (minority/majority LBO, 100% sale), pricing structure (cash payment, stock exchange, price supplement, etc.), and management support. Some options are not mutually exclusive. For instance, consider a leader whose company represents the bulk of their wealth and wants to secure part or all of its value. They can simultaneously explore industrial (100% sale) and financial (partial sale) paths, deciding based on the offers received.

When to Initiate the Process?
On average, it takes between 6 and 9 months to complete a sale operation from start to finish. This includes preparing the dossier, management meetings, competitive bidding, auditing, negotiating offers, and legal documentation. Entrepreneurs aiming to sell the entire capital (for retirement, a new project, etc.) must also consider a “handover period.” The buyer might request a transition period, typically lasting from 6 months to 2 years, potentially linked to an additional price component.

Choosing the right time to initiate the process depends on various factors. For instance, waiting until mid-year to include the current year’s figures in the valuation. It’s also crucial to aim for a period when the company shows robust growth and, conversely, avoid waiting for a downturn, capitalize on a high stock market (the benchmark for valuation), etc.

Who Will Support Me?
Don’t hesitate to enlist an investment bank for several reasons. Being guided by banking experts can help manage the complex and time-consuming phases of the selling process. They identify and engage potential buyers (in addition to those already identified), fostering competition that optimizes the deal’s conditions. The investment bank can also assist in selecting other advisors (lawyers, tax specialists, auditors, etc.).

What’s the Story?
As with many other occasions, storytelling is essential to convince potential buyers. The company’s story and its future prospects are first documented in the information memorandum, a presentation prepared by the investment bank. This document is then shared with interested buyers or investors. Financial projections should be aligned with the company’s history. Every phase of the company’s journey should be narrated coherently (launch, structuring, development, etc.) to present the company as mature enough to change ownership.

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