Which objectives should be maximized when selling a company?

We are together in each step
BY: Diego Gutiérrez22/12/2020
Which objectives should be maximized when selling a company?

Selling a company has never been a straightforward decision because of several reasons. Behind every business, there is the effort and dedication of an entrepreneur.

If an entrepreneur decides to sell their business, which they have worked so hard to develop, it is because they have thought about it very carefully. In other words, they believe in the value of the business and are confident that they will be able to sell the company at the maximum price.

In order for an entrepreneur to achieve their primary goal, it is essential that other secondary goals are met. As a general rule, the ultimate goal that motivates an entrepreneur to sell their business is financial: to obtain the maximum sales price.

The following are the objectives to be maximized when selling a company:

1. Maximising valuation 

After so many years and so much dedication, when the time comes to sell, the owner is looking for the right reward for so much effort and, at the same time, ensure the future of their retirement and their family as well.

2. Creating the best transaction structure.

Aside from the price, there are other variables in any transaction that have a great impact. For example, price payment deadlines, variable price calculation mechanisms, and so on. Working out the structure of the transaction in detail can have a positive influence on the seller's risk-taking.

3. Minimising the responsibility or personal risk faced by the owner.

Which objectives should be maximized when selling a company?

In any transaction involving the sale of a business, the general philosophy is that pre-sale risks should be covered by the seller and post-sale risks by the buyer. In the contract of sale, the seller must negotiate to limit these risks and liabilities.

4.Reducing the cost of taxation and withholding.

In any company sale transaction, there is always a tax impact for the seller. This is why it is advisable to prepare the transaction properly in order to reduce this impact within the law. The buyer usually requires some kind of retention of a part of the price to cover potential contingencies. To the extent that the Due Diligence process and risk mitigation are properly carried out, these guarantees can be reduced.

5. Structuring the ideal workplace and the non-competition commitment.

To reduce the risks of ownership change, the buyer usually requires a transition period and a non-competition commitment from the current management team and the entrepreneur.

6. Enabling the appropriate integration. 

Which objectives should be maximized when selling a company?

The process of buying and selling a company is a process where the generation of trust is essential. Therefore, the seller must show a collaborative attitude with the buyer both before and after the closing. It is common for part of the price to be variable and subject to the short-term performance of the company. This model helps the seller to facilitate the transition.

If these objectives are maximised, a business owner can rest assured that the business he or she has seen grow as a result of their hard work will be sold at the price it deserves. 

The M&A Professionals



Do you want to be up to date?