![]() ![]() Once we have a potential buyer or seller, and have a preliminary offer on the table, the next step will be formalizing a Letter of Intent (or LOI) where the parties will set out in writing the most relevant aspects and milestones of the transaction they wish to carry out.Ĭonsidering that the buyer is going to dedicate resources to the sale and purchase process and that this will entail an economic cost (such as the time of its own personnel and the fees of the external advisors), it is essential that the buyer is confident that the seller agrees to proceed with the transaction under pre-agreed terms as reflected in the Letter of Intent. It is important that the potential buyer cannot later on use this information for its own benefit or disclose it to third parties if, ultimately, does not acquire the business. During the initial contacts that the parties will maintain, information referring to the business will be exchanged so that the potential buyer can perform a preliminary evaluation of the business and express its interest in such business. When initiating conversations with any potential buyer or seller, it will be essential to sign a Non-Disclosure Agreement (or NDA). The valuation of the business will also help us to identify areas that can negatively affect the market value of the company and which, if fixed over a short period of time, can substantially increase the value of the company. If we have received a spontaneous purchase offer without having looked for it, the professional valuation of the company will also help us to make sure that the price offered is within the market range and that we do not sell the business underpriced because we have not valued it correctly. In order to sell a business, the first step is to make an objective and professional valuation to set a market price range that is acceptable and makes sense to potential buyers.Ī very common mistake made by sellers of SMEs is to value the business subjectively, based on the economic investment or effort that the seller has put into the business over the years, on its sentimental value, or on the future economic needs that the seller expects to require on a personal or family level.Īs a general rule, the real market value of a company is directly linked to the expected future profits that the company may generate to the buyer and, for this reason, it is essential to obtain an objective and professional valuation of the business in order to be able to set a price range which is generally acceptable and avoid wasting time in the search for buyers that will never come due to an unrealistic price, or hastily discard offers which are consistent and aligned with the real value of the company. That firm must have experience in the relevant sector and in the type of company that is being sold. In this case, it will be essential to engage a corporate finance firm to search for suitable buyers/sellers. However, on many other occasions the search for a buyer or a seller must be initiated from scratch. In other cases, it comes from a prior knowledge of the business because the parties are in the same sector (for example, the buyer is a competitor of the target company) or from a personal relationship between the buyer and the seller. Often, the opportunity to buy or sell a company arises from an existing business relationship between the parties (in which the target company, for example, is a supplier of the buying company). Closing the sale and purchase of the franchise business.The sale and purchase of franchised businesses.Sale and purchase of assets versus sale and purchase of shares.Declaration of the foreign investment/divestment.Closing the sale and purchase transaction.Earn-out for buying and selling a business. ![]()
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