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In this article on company sales, you will learn
Company sale: So that it continues (in parts)
In a crisis, a company sale - or at least the sale of individual business units - can be a promising option to stabilize the company and enable it to continue its business activities. However, the associated merger and acquisition (M&A) process is a much more serious corporate restructuring measure than the strategic and operational restructuring of a company. After all, a company sale is not about reorganizing the company and preserving it as far as possible. No, this measure aims to separate individual divisions from the company and sell them in a targeted manner.
Taking the sometimes painful step of selling a company and initiating a merger and acquisition process may, in case of doubt, be the only way to make a struggling company profitable again. If the company gets rid of those business areas that no longer work or stand in the way of a successful implementation of the corporate strategy, it can completely realign itself and, in the best case scenario, even tap into new sources of income.
Merger and acquisition: take economic conditions into account
The economic conditions at the time of the merger and acquisition process are a key success factor. If interest rates are low, investors look specifically for properties that promise high returns. Some venture capitalists have specialized in mergers and acquisitions as well as trading in companies or parts of companies. In addition, lucrative exits and merger and acquisition processes are already part of the business model of many business angels. It is therefore not surprising that the number of M&As in Germany is increasing - regardless of whether it is a distress M&A, i.e. the takeover of a company with a high risk of illiquidity or over-indebtedness.
The merger and acquisition process for handling the sale of a company is not entirely straightforward. A whole range of business, commercial and contractual aspects need to be taken into account. To make matters worse, entrepreneurs often have little or no experience with mergers and acquisitions. This makes professional M&A advice all the more sensible and valuable - especially in the case of a distress M&A. Merger and acquisition consultants support companies in planning the merger and acquisition process as well as in managing all other business and legal challenges associated with a company sale. It is therefore highly advisable to take advantage of professional M&A advice.
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Selling a company: How does a merger and acquisition process work?
An M&A process usually goes through three phases: preparation, transaction and integration.
After the company in crisis and the strategic investor have agreed to the sale of the company, the first step in the preparation phase is to thoroughly examine the target company or individual parts of it and make the information obtained available in the form of a memorandum or fact book. During the transaction phase, this information serves as the basis for negotiating the purchase price and the precise planning of the actual transaction. Once the purchase agreement has been signed, the buyer takes over all or part of the target company in the final integration phase. If desired, the integration or merger of the acquired company then takes place.
Selling a company: the merger and acquisition process in detail
When dealing intensively with the sale of a company and the merger and acquisition process, the preparation in particular turns out to be relatively time-consuming and labor-intensive. First of all, the M&A process has to get underway. This is where a strategic investor, who creates value with the help of mergers and acquisitions on behalf of an investment company, for example,
- is required to identify potential M&A targets and select a target company through an initial screening,
- to agree with the target company whether there is any interest at all in a company sale, and
- to initiate the M&A process by submitting a letter of intent.
Once both sides have declared their willingness to merge and acquire, the actual work can begin, starting with an in-depth review of the target company. The next step
is therefore due diligence. The aim is to compile data to assess the value of the company and to identify potential deal breakers that would destroy the M&A process at an early stage. The following analyses are usually carried out to determine the strengths and weaknesses of the target company:
✔️ quality of the management and its readiness for M&A as well as
✔️ quality of the employees and their readiness for M&A.
In addition to the personnel, the business situation of the company must also be assessed. This involves defining
✔️ the company's objectives,
✔️ analyzing the company's earnings and liquidity position,
✔️ assessing the risks to which the business model is exposed and
✔️ reviewing operational structures, including processes and quality management systems.
Last but not least, the branding and the communication of the target company by having M&A consulting professionals assess
✔️ how the company is perceived by the public and
✔️ whether it is susceptible to white washing or green washing.
Once due diligence has been completed, the merger and acquisition process preparing the sale of the company is complete. What follows is the actual transaction. It is essentially based on the results of the due diligence. This phase is therefore about
- finally structuring the transaction and
- evaluating the target company with a view to price negotiations.
The value of the target company basically corresponds to the sum of its going-concern value (assets less liabilities) and its distress sale value (distress sale value), after both variables have been weighted with the normalized probability of insolvency. The signing of the contract concludes the sale of the company and the integration phase can begin. However, this is no longer the responsibility of the acquired company.
M&A advice in critical special situations
In view of the complexity of mergers and acquisitions, it is clear that it is extremely important to plan a company sale carefully. However, small and medium-sized enterprises (SMEs) in particular often lack strategic preparation due to a lack of resources. This is because management is often so busy with operational business that there is no time for the strategic considerations that come to the fore in crisis management. However, if a company sale is the last sensible measure for restructuring a company, decisions need to be made quickly. After all, it is important to avoid an over-supported company sale if possible, because the distress sale value usually forces a company sale below value.
Those who turn to experienced advisors in such critical situations, who provide companies with advice and support in all phases of the merger and acquisition process, can also handle a company sale in an orderly manner. At the same time, the chances of emerging from the M&A process with a very good result and taking the company restructuring a big step forward are increased.
Is your company in the midst of a serious crisis? Don't hesitate to contact us. We will support you immediately in finding suitable interim professionals for company sales!
