Every year, 50,000 companies change hands. This section aims to familiarize you with the major issues of this crucial stage in your professional and personal life.
Par Thomas Blard, managing partners chez Titanium.Partners
No one is rich from his debts. You can quickly measure it when you sell your business.
When you sell your business, you have in mind all the assets built or acquired over time. They are valued, they are estimated to be worth millions. And we dream of the check that this represents and the projects that this money will make it possible to realize.
But we often forget the passive. But the buyer will not forget it. With the help of your advisor, you will therefore fiercely negotiate the enterprise value, speaking of multiples or comparables.
And at the very end, the buyer will present to you, the addition or rather should I say the subtraction.
Because let’s not forget that the money of the transaction, the one that will be paid to you and will fall into your pocket, will be the value of your company minus the value of the net debt.
And that can be a real walk. After weeks or months of negotiation, you can end up with a sum sometimes much less than what you expected.
Net debt is the difference between your cash and your debts.
If this net debt represents a surplus, it will be added to the value of your business and you will receive a bigger check. If, as is often the case, the debts, of whatever nature, are greater than your cash flow, then the net amount will be deducted from the price that will be paid to you.
What’s in Net Debt?
A company’s financial debt includes bank indebtedness and all financial liabilities, including vis-à-vis partners (current accounts), bond debts or mortgages in the broad sense and therefore includes factoring.
Added to this are interest, commitments due under employee profit-sharing and security deposits.
Finally, the amount of end-of-career indemnities must be added to this for people who have been working for more than 5 years until their retirement, according to the legal age corresponding to their personal and professional situation.
These amounts will be reduced by cash and marketable securities held by the company.
The devil is in the details
Trade receivables or supplier debts can prove to be a particularly sensitive point of negotiation.
Pay attention to payment deadlines. Anything that exceeds the legal durations, i.e. 60 days maximum, can be considered by the purchaser as falling under a liability of a financial nature.
It is therefore important to clean your accounts regularly. For example, by not keeping old unfunded trade receivables that we know will never be honoured.
Selling your company takes time. Time to find a buyer and agree on the terms. But the work should not start when meeting potential buyers and good anticipation of this event is necessary to arrive in good shape and above all prepared for this deadline.
