Selling a company
Selling a business: What you should know
Here we compile everything worth knowing and considering on the subject of selling a company that is important from an entrepreneur’s point of view. The site is continuously expanded and updated.
What all must be taken into account? What mistakes should be avoided? What affects the price? When and where does it make sense to seek support from an M&A advisor? How much does it cost? Where can I get more information? Here you will find all this and much more.
Are you already thinking specifically about selling your business, but aren’t sure what your next steps might be? Take advantage of our offer and talk to us free of charge, confidentially and without obligation about what an optimal sales strategy and buyer search might look like. We have many years of experience, will inform you about options for action and, if necessary, will be happy to connect you with the most suitable consultant from our international network. Depending on your wishes, you can receive support for the entire sales process or just for a part of it.
Related topics: Use our up-to-date online business valuation a valuation based on current market data and individual value drivers. In addition, we publish the current valuation for numerous countries, industries and company sizes every month. On our website you will also find a detailed description of the most common business valuation methods.
Sale of the company: be sure to take into account
The time factor
Avoid a hasty transaction. Plan and prepare the sales process in time.
Time pressure leads to unsatisfactory results and, in the worst case, can even mean the closure of the business if no buyer can be found. Depending on the type of handover, the length of time from initial contact to actual handover varies. An internal family succession takes an average of 6.5 years, an internal transfer 3.3 years and an external transfer 1.6 years. Depending on the size of the company and the complexity of the transaction, it can be faster, but it can also take longer.
Sell the company itself
How much experience in business sales do you bring to the table? In all likelihood, the sale of your own business is a unique matter, a situation in which you have not found yourself before and for which you have no experience or expertise. Mistakes can cost you dearly, and not just financially. There are also tax and legal aspects that need to be considered.
How much time can you spare for the sales process? As a company owner, you are usually already busy with the day-to-day business. There is not enough time to prepare and carry out the demanding and time-consuming sales process, which can last from several months to years and can suddenly become intensive at any time. Neglecting day-to-day operations during the sale process can significantly damage the company, its value, and its salability.
How great is the need for discretion? An external consultant can search for potential buyers and clarify their interests without having to disclose the identity of the seller. Who qualifies as a buyer? The higher the benefit for the buyer, the higher the achievable purchase price will be. Finding that buyer is not always easy. A well-connected consultant is therefore worth his weight in gold and can lead to a significantly higher sales price.
As an absolute minimum, the purchase agreement should be reviewed by a lawyer experienced in this field, unless you are an expert in the field of commercial contracts. For companies above a certain size (roughly from EUR 1 million turnover), the benefits of comprehensive consulting, i.e. the increase in value through optimal process management, increase in sales opportunities and minimisation of risks, are in good proportion to the costs of a consultant. For smaller companies, it can make sense to agree on leaner consulting models, for example coaching on specific topics on an hourly basis.
The tax aspects of the transaction should also be assessed and optimized by an expert in advance.
Forms of company succession
A company sale can be internal to the family, internal to the company or external to the company.
Roughly speaking, succession can be divided into three forms:
When selling to a family member, we observe discounts from the market price of 30% or more. Even in the case of an internal company succession, the price is usually below the market price. Here, an average of 10-20 percent is common.
The 7 typical steps of a successful company sale
From the initial thoughts of selling a company to the closing (final transfer of ownership in a specified manner), there are numerous steps to complete.
1. preparation – The most important questions that arise at the beginning:
2. determine goodwill and prepare sales documentation:
Company valuation and sales documentation are each based on two pillars. On the one hand, on the financial figures – past, present and forecast future – on the other hand, on numerous qualitative factors such as strategy, management, organization, but also the product, market, supplier and customer structure. This is how the ACTUAL state of the company is determined. The goal is a company evaluation and a realistic company presentation in an exposé (also called information memorandum), which truthfully depicts the company and also highlights its strengths and potentials. This exposé serves as information for serious prospective buyers, who have previously signed a confidentiality agreement, and is the basis for the sales negotiations. The better the documentation anticipates the questions of potential buyers, the more efficient and resource-efficient the buyer search will be.
An anonymized summary, a so-called “blind profile” (also called a teaser), is written to address potential buyers. It should contain enough information to attract the interest of potential buyers without revealing the identity of the company.
3. Optimization: Are the numbers not so good at the moment?
It is then important to be able to credibly show why this is the case and that the current figures do not reflect the “true” earning power and potential of the company. Whenever possible, you already initiate positive changes yourself so that an upward trend can be seen.
In addition, there may be ways and measures to improve the figures in the short term, for example by reducing costs.
4. buyer search – who comes into question as a buyer?
A financial investor, a strategic investor or a private investor? Is there a potential buyer within the ranks of your own management or within the family? Does it make sense to address a wide range of people or is it better to address specific individuals?
Financial investors, such as private equity funds or family offices, primarily look at profits and sufficient cash flow to finance the debt capital.
Private equity funds are usually invested only for a certain period of time (3-7 years). They achieve their value creation through high leverage, an increase in enterprise value and profitable resale. The financing costs must be borne by the purchased company, i.e. it also bears the risk. Family offices usually have a longer time horizon but similar return expectations. Most family offices focus on diversifying their assets and prefer to invest in innovation and growth sectors.
Strategic investors are usually invested for the longer term and can be competitors, customers, suppliers or business partners who want to strengthen their own business model via a company acquisition along the value chain or in related, or complementary areas. This can be achieved, for example, through the acquisition of know-how (e.g. processes and patents), regional business expansion, the synergistic use of economies of scale and scope, or access to new customer groups. In addition, strategic investors also invest in new business areas to compensate for fluctuations or declines in the traditional core business. Buying a company with a lot of sales (and little profit) can also make sense in order to improve your own cost structure. For this reason, NIMBO considers sales in addition to profit in its analysis.
The selling price tends to be higher than the determined value in the case of a sale to a strategic investor or a financial investor.
If you only want to sell company shares, it should be noted that a strategic investor will be more involved in the business than a financial investor.
A family or loyalty discount is usually available in the case of an internal family or company succession. Thus, in both cases, the selling price remains below the theoretical goodwill.
In consultation with the seller, the consultant discreetly searches for potential buyers, either on the basis of a specific proposal from the seller (e.g. from the competition), in his own network or by researching possible interested parties.
The address is made exclusively with the express consent of the seller. Generally, the identity of the seller is not yet disclosed at this stage. If there is interest, the potential buyer learns after the signature of a confidentiality agreement, around whom it is concretely and gets the detailed exposé handed over. If the consultant is well connected both in the industry and in the region in question, this increases the chances of a successful sale.
5. screening and selection of prospective buyers
In the best case scenario, there are several interested parties at the same negotiation stage in the process. This improves the negotiating position and thus the likelihood of achieving a higher price and finding the optimal buyer who will carry on the owner’s philosophy.
After the prospective buyer has had time to look through the detailed exposé (Information Memorandum), a meeting to get to know each other is arranged. If desired, the consultant can take part in the meeting or play an active role, for example by moderating the discussion.
Once the management meetings with all interested parties have been completed, the next step is to invite them to submit a non-binding purchase offer. If you receive several offers, the worst ones are sorted out and only the best ones move on to the next round.
Time and again, company sales fail due to financing issues. It is important to check in good time whether the potential buyer has the necessary financial means available or will be able to obtain appropriate financing.
6. negotiations and the performance of due diligence.
The negotiation process is influenced by economic, but also tactical factors, as both sides try to achieve a result that is as favourable as possible for them. This should not bring the process to a halt.
Situational arguing has nothing to do with professional negotiation tactics. It is important that one’s own concrete interests, expectations and fears and those of the negotiating partner are clearly defined. A consultant can do a lot as a mediator to lay the foundation for a constructive discussion.
The most common reasons that lead to the failure of negotiations are different ideas about price, warranties and the assumption of risks. Creativity and openness to alternative transaction models are important here. For example, deferred payments that are contingent on the future performance of the firm can be a means of building a bridge between the different price expectations. The role of an advisor in this process is to introduce appropriate ideas into the negotiations.
If so-called deal breakers emerge late in the negotiation process, this is particularly annoying for all parties involved, as a lot of time and money has already been invested. Dealbreakers may arise for understandable, economic or legal reasons, but they may also arise from a misunderstanding.
This is where the consultant plays an important role. On the one hand, by raising possible critical points in advance and putting them up for discussion, on the other hand, by listening carefully during the negotiations to make sure that both parties say and mean the same thing.
If it becomes concrete, the consultant drafts a preliminary contract and supports a due diligence (audit) by setting up a data room and advising the entrepreneur on the selection of documents to be placed there. If the due diligence is satisfactory and agreement has been reached on all points, the buyer submits a binding offer, which forms the basis for the purchase contract.
7. conclusion of contract
There is a need for clarification and structuring in financial, business management, legal and tax terms. The consultant knows for which case a specialist is required.
The purchase agreement should be drawn up by a lawyer.
If shares are transferred, notarial certification is required by law in many countries.
Normally, each party bears its own counsel and legal fees. If a notary is required, these costs are generally shared.
The due diligence audit of the company through and through
The serious prospective buyers usually examine the company for sale carefully after submitting a non-binding offer to ensure that all information and data ultimately relevant to the purchase price have been accurately presented by the seller.
In the past, files and papers were checked in a room, but today the relevant documents are usually uploaded with password protection to a virtual data room where they can be viewed via the Internet. The amount of work involved is also always related to the size and complexity of a company.
Due Diligence Checklist: What is it about and what do I need to provide?
Classically, the audit focuses on three areas:
Finances and taxes
This essentially involves (without any claim to completeness)
This is about
And if applicable, the technical and organizational area
This is about
Is the buyer a good fit for my company?
Critical factors can be the management style, decision-making processes, communication, transparency and possible integration into an existing, possibly larger organisation. If there are discrepancies, the top performers often leave the company after a short time. This can lead to massive drops in productivity and a deterioration of the bottom line.
If possible, the management or the top performers should be involved in the sales process. If the company succeeds in creating a “we” feeling with the new owner, employees will remain motivated, focused and supportive.
External company sale or sale of shares within the family or the company
An external company sale can be made to a private investor who will also manage the company operationally, to a financial investor or to a strategic investor.
A private investor with both the financial and professional background to take over and manage the company will generally continue to operate the business in a similar manner as before.
Selling to a financially strong investor can significantly increase the growth of the company if this makes business sense. If a bidding process can be successfully set up with several interested parties who are interested not only in the company itself but also in the resulting synergy effects, a price above value is usually achieved. In the case of a sale to a competitor, there are the variants that a foreign company wants to enter the market, or that a local competitor wants to buy market share.
There are three different options for succession within the family: a gift (anticipated succession), a transfer in return for recurring benefits (pensions, dividends, etc.) or a purchase. In the case of a sale to a family member, we observe discounts from the market price of 30% on average.
Is there a manager or management team in the company that you trust to take on the role of responsible entrepreneurs? Provided that the company is in a good enough financial position so that the purchase price can be financed from cash flow, this type of company transfer stands for stability and continuation of business as before. If the buyer(s) do not have sufficient equity, a loan from the contractor may be a solution. We observe a discount of 10-20% in intra-company transfers.
Tax valuation in case of family or company-internal transfer
The tax office increasingly questions the amount of the purchase price when a company is sold within the family or between a company member and the shareholder.
The Valuation Act (BewG) specifies how a company valuation for tax purposes is to be carried out. The main issue here is the collection of gift and inheritance taxes.
In Germany, company valuations for tax purposes only take into account the figures for the last three financial years; future earnings power is not taken into account. In the case of small and medium-sized enterprises, the tax valuation is usually significantly higher than the sales prices achievable on the market. The tax office assumes approximately nine times EBIT. If the family member or manager pays a lower purchase price, gift tax is due on the difference. However, the buyer has the right to prove that the valuation does not reflect the market value and thus reduce his tax burden.
In this case, a professional valuation according to the standard of the Institut der Wirtschaftsprüfer (IDW S1) is recommended. However, the business valuation must be prepared prior to the transaction.
INFLUENCES ON THE SELLING PRICE
What is the best starting point to achieve a high price?
- Someone actively approaches you and makes you an offer.
Since someone here is already strongly interested in your company, you have a comfortable negotiating position and a good chance of achieving a price that is (significantly) above the value, especially if you are in no hurry to sell. A company evaluation will give you a starting point.
- You systematically consider who all could be potential buyers, approach them all at the same time and then conduct negotiations in parallel with all interested parties. Competition stimulates business and drives up the price.
Is the goodwill identical to the sales price?
The value of the company is not the price, but it is a basis for pricing. The price results from supply and demand and the negotiations. Parameters in the negotiations are, for example, the transaction structure, guarantees and warranties.
The seller wants to get the maximum price for his business, the buyer wants to pay as little as possible. The purchase price should be fair for both sides. The purchase price should be able to be paid off after 5-8 years.
Typical sales conditions
Under what circumstances is a buyer willing to pay a higher price?
When does the seller tend to be willing to lower the price?
COMPANY SALES WITH CONSULTANT SUPPORT
What is his task and what added value does an M&A consultant offer?
M & A consultants (M & A = Merger and Acquisitions) ensure process reliability. This helps to avoid expensive and time-consuming mistakes.
The consultant has an outside view of things, is neutral, objective and free of obstructive emotions.
He knows the sequence of necessary steps, is focused on the essentials and sets up a structured process. In consultation with the seller, a project plan with milestones is developed.
A consultant who is well connected in the industry as well as in the respective region ensures that the circle of buyers is large enough and thus increases the chances for a successful sale.
A discreet approach is essential. If the intention to sell is made public too early, this can have a very negative impact on the company, be it through employees quitting, unsettled customers or suppliers. A consultant is a middleman and offers discretion. In addition, he knows when, to whom, which information should be disclosed and in which situations caution is required.
Due to his experience in M&A transactions, a good advisor recognizes dubious and financially weak purchase candidates at an early stage and can exclude them from the process. This saves time and prevents indiscretion.
In the negotiations, the consultant knows the usual regulations but also the stumbling blocks and can introduce new ideas. He can address possible critical points in advance. By listening carefully during the negotiations, he can avoid misunderstandings which, in the worst case, could lead to a breakdown of the negotiations.
There are two types of consultants. There are advisors who accompany the entire sales process from preparation, through the search for a buyer, to the conclusion of the contract, including coordination with lawyers and tax advisors. The other group is comparable to a real estate agent. Here the service is limited to the search for potential buyers in the role of an intermediary/broker. For small businesses, this option may be sufficient and usually only involves performance-based costs.
What can’t a consultant do?
The consultant can take a lot of work off the hands of the business owner to keep the time burden to a minimum. Nevertheless, there will still be some work to do for the owner. Especially in the beginning, the consultant is dependent on the cooperation of his client to gather all the information necessary for the sales process and to gain a deeper understanding of the company. Likewise, the necessary time resources for personal meetings with potential buyers and their preparation must be planned.
Bringing in an advisor is no guarantee that the company will be sold. There are companies that are actually not for sale. In Germany, about a quarter of the companies ready for handover cannot be sold and are shut down. The main reasons for failure were : company too small, poor profitability, investment backlog, lack of competitiveness and future viability.
What does an M&A consultant cost?
A serious consultant will get an overview of your company without any obligation and free of charge, work out your goals, sales strategy and needs together with you. If he estimates the probability of success to be high under the given general conditions (for example your price expectations), he will then make you a written offer.
If you commission the consultant with the entire sales process, including preparation, buyer search, negotiations, etc., the fee model usually consists of a fixed and a performance-based component. Some, few consultants work exclusively on a success-dependent basis. Advantage for the client: Costs are only incurred in the event of success. Disadvantage: The consultant is under massive pressure to succeed; he will try to complete the sale as quickly as possible, regardless of whether it is the best achievable price.
Fixed consultancy costs (basic costs, retainer)
A sales process usually takes 6-12 months, but can take several years and requires a lot of work from the consultant, especially in the beginning. The fixed part of the fee is primarily intended to ensure the seriousness of the intention to sell and to cover at least part of the consultant’s costs in the event that the client changes his mind in the middle of the process and no longer wishes to sell. This can be in the form of a one-time payment at the beginning, payments upon reaching certain milestones (e.g. completion of documentation, first meeting with the counterparty, etc.) or defined as a monthly amount (the so-called retainer). There are different models for monthly payments. They can be charged only for the first 3-6 months or for the entire duration of the sales process. Some, a few consultants, forgo a fixed component throughout the sales process. In this case, the performance-related component is higher. Offsetting the fixed cost portion against the success commission in the event of success is a fair solution for both sides.
If a lump-sum fee is agreed upon, its amount depends on the expected workload of the consultant (especially for the company documentation). For smaller companies with expected transaction values in the range of EUR 1 to 5 million, they usually total EUR 5,000 to 20,000, with monthly payments in the range of EUR 1,000 to 4,000.
Performance-related consulting fees
Consultants work mainly on a contingency basis, which means they receive a percentage of the transaction value. The lower the expected sales price, the higher this percentage, since the amount of work depends only to a limited extent on the transaction volume, but more on the complexity of the transaction. An additional determining factor for the level of remuneration is the saleability of the company and the estimated length of time the process will take. Consultants with a lot of experience and a good network in the respective industry can justify a higher percentage, as their expertise significantly increases the sales chances and possibly also the quality of the potential buyers.
Below you will find a rough indication of the usual performance-related components for a consultant who accompanies the company owner comprehensively, intensively and throughout the entire sales process, including an active and systematic search for a buyer. These are to be understood in combination with a fixed, non-performance-related component.
Usual consultant commission in % of the sales price – varying according to industry and company size
< 1 million €: 5 – 10%
1 – 3 m €: 4 – 7%
3 – 10 m €: 3 – 6%
> 10 m €: 1 – 3%
A minimum fee may be agreed.
If the advisor only acts as an intermediary/broker and does not otherwise accompany the sales process, he also receives a commission, but the percentage is lower.
If you do not wish to entrust the consultant with the entire sales process, but only require assistance in certain areas, such as the preparation of the exposé, you will be invoiced on the basis of an hourly fee / daily rate. Usual daily rates range between 1000 and 2000 €, whereby the amount does not say anything about the efficiency of the consultant and you may come to a lower total bill with a more expensive but more experienced consultant.
Four examples of different fee models
There is no single fee structure for a sales process, and in practice there are a multitude of billing models in countless variations.
To give you an idea, some common models are explained below as examples.
|Success fee||The consultant works exclusively on a contingency basis. His contingency fee is 5% |
from the amount of the sale. If the sale does not take place, the consultant receives nothing.
(There are consultants who hedge this risk with an “exit fee”).
|Total transaction amount: |
2 million €
Success fee: 100.000 €
(5% of 2 million sales price)
|Basic and |
|Basic fee: The consultant charges a basic fee of € 2,400 (plus VAT) for the consulting concept, research work and the preparation of a blind profile and a company presentation upon conclusion of the contract. The first installment of € 1,800 (plus VAT) is due immediately upon signing, the second installment of € 600 (plus VAT) upon receipt of a Non Disclosure Agreement (NDA) from an interested party. |
Success fee: For the first visit of a prospective buyer 900,- € (plus VAT) will be charged. A maximum of 3 visits are charged, all others are free of charge) Visits are initiated exclusively with the client’s consent.
If there is a signed letter of intent from an interested party, the consultant charges € 1,800 (plus VAT).
In this case, the consultant charges a staggered success fee from the transaction value of
5% for the first million €, plus
4 % for the second million €, plus
3% for everything over €2,000,001
but at least € 25,000 plus VAT in the case of a company sale.
A charge of 1.5 % is made for the assumption of loans or guarantees. Credit amount: 100.000 €
The fee already paid is deducted from the success fee for the transaction value, e.g. 2 visits in total 1.800,- € + a “Letter of Intent” 1.800,- € = 3.600,- €.
|Total transaction amount:|
2 million €
Base fee: 2400€
plus 1.500 €
(1.5% of 100.000€ credit)
plus 50.000 €
(5 % of € 1 million)
plus 36.000 €
(4% of 900.000€)
minus 1800 €
(Payment for 2 visits to possible buyers)
minus 1800 €
(Payment for a LoI)
|86.300€ (plus VAT)|
|Monthly payment plus|
|Base fee: The consultant receives a fixed monthly payment of €4,000 (plus VAT) from the conclusion of the contract for the entire duration of the contract (either until the contract is terminated or until the company is sold). Transaction duration in this example: 12 months|
Success fee: The consultant receives 5% of the transaction value (purchase price).
A charge of 1.5 % is made for the assumption of loans or guarantees.
|Total transaction amount: |
2 million €
Base fee: 48.000€
(12 months x 4000€)
(5% of € 1.9 million)
plus 1500 €
(1.5% of €100,000 loan)
|Hourly fee according to time and effort,|
|Base fee: The consultant charges an hourly fee of 150 €.|
Estimated number of hours for a company that can be sold without problems:
– Documentation, preparation of figures and research: 50 hours
– Buyer approach: 50 hours
– Meetings and negotiations: 30 hrs
– Contracting and follow-up: 10 hrs
Success fee: The consultant charges 5% of the transaction value (purchase price). In the event of success, the base fee is offset against the contingency fee.
|Total transaction amount:|
2 million €
Base fee: 21.000 €
(Total remuneration according to effort: 140 hrs à 150 €)
plus € 100,000
(5% of 2 million)
less € 21,000
(Crediting of hourly expenses to the success fee)
Sell an OnlineSHOP
There are four categories of buyers for an online store, depending on the amount of sales and profit:
SELLING A COMPANY THROUGH AN ADVERTISEMENT IN A COMPANY EXCHANGE
Especially for sellers or potential buyers of smaller companies, an advertisement on a relevant platform or a so-called company exchange can be a way to attract attention. There you will find companies that are advertised for takeover as well as the possibility to offer your own company for takeover. Some platforms have a regional focus or specialize in certain industries.
An advertisement can make sense for both sides: On the seller’s side, for small companies with a turnover of less than one million who want to find a successor in the medium term or who want to get an overview of the succession market. On the buy side, for talented young people who are faced with the decision of starting their own business or continuing an established business, or for employees for whom self-employment might be an option.
The cost of using a company exchange varies widely. Therefore, the fine print should be read carefully. The spectrum ranges from free and paid advertisements and additional consulting packages, to monthly fees with and without a minimum term, to a fixed amount or a percentage success commission if a transaction is concluded via the advertisement.
In addition to differences in cost, there are also differences in the quality of the platforms. Make sure that quality assurance is performed and that your data and profile entry is checked before activation.
If the price is set unrealistically high, you will not be successful with your ad. In the UK, it seems that only 5% of the companies offered on a company exchange are actually sold for precisely this reason.
Depending on this, it is difficult to maintain anonymity. If you reveal too little about yourself, you will not attract interested parties. If the intention to sell becomes public, this can have a negative impact on the company. Interested parties should be asked to sign a confidentiality agreement, also to prevent internal information from falling into the wrong hands.
It can happen that you attract sightseers with your advertisement, who simply like to visit companies but have no intention whatsoever to buy the company.
Fraudsters are also active here. Distrust is appropriate if the buyer wants to buy the company sight unseen, accepts any price, proposes foreign exchange transactions or wants to conduct the transaction abroad.
Company Succession in Germany
In 2020 and 2021, many medium-sized companies have had to fight primarily for survival. Any plans for the future or for a handover were forced to pause during this time. The picture for 2022 is much more positive: by the end of the year, around 230,000 companies will be seeking a succession solution. Despite greater optimism on the part of entrepreneurs: The structural succession gap, caused on the one hand by low birth rates and on the other hand by low interest in self-employment, makes the search for a suitable successor more difficult.
Initiatives have emerged to bring together those willing to hand over and take over. One example is the RKW Competence Center, which has launched numerous model projects.
Each year, the Chambers of Commerce and Industry provide information, advice and support to approximately 30,000 entrepreneurs, i.e. both entrepreneurs looking for a successor and future entrepreneurs. Numerous support offers for future entrepreneurs are available from the Kreditanstalt für Wiederaufbau, which has also published a checklist for successors.
Check tax aspects of the sale of the company before the transaction
The tax aspects of the transaction should be assessed and optimized by an expert in advance. If you do not already have a suitable tax advisor, you can find tax advisors with the additional qualification “Specialist advisor for business succession” in your region on the steuerberater.de website. Enter your postal code and select “Business succession” under “Specialist advisor”. Mistakes or omissions can cost you dearly.
Sale of company – allowance for the entrepreneur 55+
A sole proprietor may be entitled to a retirement allowance upon the sale of his business. If the entrepreneur is at least 55 years old, the capital gain remains tax-free upon application up to €45,000. The allowance can be applied for only once. The upper limit for the full exemption amount is € 136,000 capital gain. To benefit from the tax-free amount, you do NOT have to own 100 percent of the company.
Sell GmbH, or sell GmbH shares
You hold shares in a limited liability company and would like to sell them? If there are no provisions to the contrary in the shareholders’ agreement, the shares may be sold to another shareholder or to an external person. If a right of first refusal of the shareholders is noted in the shareholders’ agreement, this must be observed. It is also necessary to check whether the consent of the shareholders to the sale of shares and the buyer is obligatory in order to be able to sell GmbH shares. The transfer must be notarized and the commercial register entry must be amended. When drafting the purchase agreement, the assistance of a specialist lawyer is recommended in order to avoid liability risks or economic disadvantages for the seller.
Taxes due on the sale of shares
- In the case of a small investment of less than one percent within the last five years, a one-time final withholding tax of 25% (or, upon application, the personal tax rate of less than 25%), plus 5.5% solidarity surcharge and, if applicable, at least 8% church tax, is due on the sales profit.
- If the share in the company is more than one percent in the last five years, the so-called partial income procedure comes into play. Only 60% of the total profit is taxed at the personal tax rate, 40% remains tax-free. According to §17 para. 3 there is a pro rata allowance (9060€ for a 100% shareholding) that reduces the amount of the total taxable (= 60% share) profit. Trade tax is not incurred.
- If a corporation sells GmbH shares, under a special provision of the Corporate Income Tax Act only 5 percent of the gain on sale is taxed as a non-deductible operating expense if the corporate shareholding is at least 15 percent. In addition, trade tax and corporate income tax are due.
Company exchanges in Germany
Here you can find general information about advertisements on a company exchange and their advantages and disadvantages.
In Germany, there are numerous company exchanges where you can post an offer to sell or a request to buy. The largest, nexxt-change, is supported by the German Federal Ministry of Economics and Technology and KfW. Its 730 regional partners offer free support and help you, for example, with the formulation of the advertisement and assist you with a pre-selection of suitable interested parties. You can also advertise here if you are resident in Germany but your company is located abroad, or if you are a prospective buyer resident abroad.
This listing gives you a good overview of the most important German company exchanges.
Sell company in Switzerland
Here you will find Switzerland specific knowledge. Link to the general notes on the sale of companies
SMEs are the economic backbone of Switzerland. In the category of up to 100 employees – which are the companies that use the NIMBO company assessment most frequently – there were approximately 590,000 companies in Switzerland in 2018. The majority of these are family-owned.
Company succession should be planned for the longer term and approached in a structured manner, especially if the company represents the entrepreneur’s retirement provision. Financial planning for entrepreneurs is complex. Private provision and asset accumulation are often neglected. It can also only be strongly advised to conclude appropriate marriage and inheritance contracts as a precaution in the event of sudden death in order to ensure the continuity of the company and to find an individually suitable solution. 30 percent of the companies up for succession cannot be handed over and eventually shut down, partly because the owner does not take care of his successor or does so too late. Sole proprietorships in particular have the greater problems with succession, as those interested in a small company are more likely to start up than to take over. This not only has economic consequences for the owner, but also for numerous employees.
Tax optimization before the sale
Unbundle personal and company finances: if the owner pays out only a low salary and/or dividend for years for tax reasons, high non-operating cash can accumulate in the company. In the event of a sale, the buyer must also pay them via a higher purchase price. This situation is disadvantageous for him, as he can only distribute them at a loss in the first five years, as they would be considered an indirect partial liquidation and taxed accordingly.
Tip: Pay out non-operating liquidity as special dividends before selling. The tax burden can be additionally reduced by paying into the pension fund, but there must be at least three years between the purchase into the pension fund and the subsequent capital withdrawal.
Transfer non-operating real estate to private ownership
Company real estate whose value is comparatively high in relation to the company value should also be separated from the company assets, e.g. by selling it to the company owner.
Division of the company
If the company is active in more than one core business, it may be advisable to split up the company and sell the parts individually.
Family internal company succession
Pricing for family internal transfer
In any succession plan, the company must be valued and a price set. To avoid conflicts later on, it is advisable to seek an independent professional for this task. A 2016 Credit Suisse survey found that the price for family members or friends is lower than for an external succession. Both groups receive an average discount of 41% of the market price. 18% of family-internal transferees even received the company “free of charge”, e.g. via an advance inheritance or a gift.
Cantonal differences in gift tax
Gift tax becomes due for the donee. Spouses and children are tax-exempt in most cantons. Exception: in the cantons AI, GR, JU and VD there are tax allowances.
Cohabiting partners are not equal to spouses. They are taxed in the highest tax bracket; exceptions are the cantons of OW, Schwyz and Zug.
Tax optimization in the case of family-internal transfer in Switzerland
Many of Switzerland’s family businesses have too much liquidity that cannot be transferred to the entrepreneur’s private assets without incurring substantial tax payments.
One solution is to set up an inheritance or acquisition holding company, which reduces the seller’s tax burden and thus enables the succession to take place at a sustainable price. In such a situation, it is advisable to obtain a so-called tax ruling from the competent tax authority, a binding legal analysis obtained in advance.
The newly established joint stock company (the holding company) takes over the family business. The AG borrows outside capital for the acquisition. The holding company receives dividend payments from the subsidiary, from which it repays the borrowed capital. The advantage of this is that the repayment of the loan can be linked to business performance. Various models are conceivable when it comes to drawing up the contract, depending on who the borrowed capital comes from. For example, the previous owner could retain the majority of shares until half of the loan is repaid by the holding company.
Sale of shares from private assets
An important question is whether a sale of the shares from private assets would constitute a tax-free
represents capital gain. This is dependent on various factors at the seller,
but also depends on whether the purchaser makes distributions that are to be valued as substance withdrawals in the five years following the purchase. If this “substance” already existed prior to the purchase, was distributable under commercial law and not necessary for operations, and if the seller knew that funds would be withdrawn from the company for financing purposes, the sale is taxable.
Whether these facts, which trigger a tax liability, are actually fulfilled in the individual case should be checked by a tax expert. Obtaining a legally binding commitment from the tax office is also strongly recommended, depending on the complexity of the transaction.
Company exchanges in Switzerland
Here you can find general information about advertisements on a company exchange and their advantages and disadvantages.
Especially for sellers or potential buyers of smaller companies, an advertisement on a company exchange can be a way to attract attention. There you will find companies that are advertised for takeover as well as the possibility to offer your own company for takeover. Larger company exchanges in Switzerland that have been around for a while include Companymarket and firmforsale, for example.
Funding and promotion
In Switzerland, business promotion for SMEs is basically organized on a cantonal basis. On this page of the Department of Economics, Education and Research you will find useful links on the topic of economic development in your region. Furthermore, there is information on regional funding institutions that can provide support to a company in the start-up phase in addition to banks. But there are also numerous funding instrumentsat the federal level.
Company transfers in Austria
You want to sell your company or want to take over a company? We have compiled a range of information and useful links for you. Due to demographic change, about 6500 age-related company transfers per year are to be expected in Austria in the next few years. The share of family-internal transfers has decreased steadily over the last decade and is currently stable at around 50%. The other half of the companies are sold to employees or to external parties.
Selling a company, buying a company
A very good first overview for transferors or transferees of an Austrian company is provided by the information brochure of the Chamber of Commerce.
Important: Each case is an individual case! Much depends on various factors, and there are no universal answers. It deals with legal, in particular tax, administrative and business management issues and questions of financing. If in doubt, seek professional assistance.
Many things have to be considered and mistakes should be avoided if possible.
Help withtax issues
KSW, the Chamber of Tax Advisors and Certified Public Accountants offers a free initial consultation. Information on the KSW offer including links to the regional office responsible for you.
Other legal issues
If you do not have a notary you trust, the platform of the Austrian Association of Notaries is useful for you. You can find a lawyer in your region and with the desired specialization on the page of the Austrian Bar Association or alternatively you can find a lawyer here.
Time frame for a company handover
Depending on the size and complexity of the company, a planning horizon of 5-10 years is appropriate for an orderly and successful handover. Included here is the sales process, which, depending on the attractiveness of the company and other circumstances, takes on average between six months and two years. The planning should be documented in writing.
Support for company takeovers
Various funding opportunities are available. They include preferential loans, one-off investment grants, tax and fee concessions and consultancy grants. People who have used these promotions rate them positively and worth the effort.
Unfortunately, the funding landscape is confusing and varies from state to state. There are also funding programmes at federal and EU level. The funding landscape is constantly changing. It is important to inform yourself thoroughly in advance in order not to give away any money. Your tax advisor may be able to help you further, or get an initial overview of whether and which subsidies are possible for you under the link of the subsidy database of the Chamber of Commerce or the subsidy pilot of Austria Wirtschaftsservice GmbH.
Subsidies for the hotel and tourism sectors: ÖHT (Austrian Hotel and Tourism Bank), special subsidies for young entrepreneurs are also available.
The New Business Start-Up Promotion Act (NEUFÖG) exempts new businesses as well as business and partial business transfers from various government levies and fees under certain conditions.
Important: The business transferee must have obtained a confirmed declaration of (partial) business transfer (official form NeuFö) before the first contact with the authorities. The appropriate form is available from your Chamber of Commerce or as an online form, and it can be submitted electronically. This requires a mobile phone signature or citizen card.
Company exchanges in Austria
Here you can find general information about advertisements on a company exchange and their advantages and disadvantages.
Especially for sellers or potential buyers of smaller companies, an advertisement on a company exchange can be a way to attract attention. There you will find companies that are advertised for takeover as well as the possibility to offer your own company for takeover. Austria’s chambers of commerce also operate a succession exchange. The advertisements are free of charge and can be placed anonymously.
Useful links for selling a company in the UK
You are an independent sole trader, a partnership or a limited liability company and the company is to be sold: Your responsibilities
Who all must be informed in this case and what all must be observed? As for the government side, this British government website provides information.
Company sale in the United Kingdom via a sales platform
Numerous SMEs are offered on so-called businesses-for-sale websites, partly by the owner himself, partly by business brokers. The largest, most professional and best known platforms are RightBiz and BusinessesForSale. RightBiZ’s focus is on food, while BusinessesForSale’s focus is on retail and food. Services are the focus of Daltonbusiness.com and at BusinessTradeCentre, the only platform where you can advertise your business for free, the focus is on bars, commercial real estate, services and digital businesses.
How long does a company sale take?
Avoid a hasty transaction. Plan and prepare the sales process in time.
Depending on the type of handover, the length of time from initial contact to actual handover differs. An internal family succession takes an average of 6.5 years, an internal company 3.3 years and an external company 1.6 years. Depending on the size of the company and the complexity of the transaction, it can be faster in exceptional cases, but it can also take significantly longer.
Can I sell my business myself?
If you have experience in business sales, you can. If you do not have any experience and expertise, it is not advisable. Mistakes can cost you dearly, and not just financially. There are also tax and legal aspects that need to be considered. Get expert advice in time, but make the decisions yourself.
What forms of company succession are there?
A successor can be internal to the family, internal to the company or external to the company. Roughly speaking, three forms can be distinguished:
Purchase against one-time payment, transfer against multi-year or recurring payments (annuities, installments, permanent charges) and
Donation (anticipated succession).
What are typically the steps involved in a company sale?
Development of a strategy, preparation of a company valuation and sales documentation, cleanly prepared figures and a realistic asking price, buyer search: longlist/shortlist; if possible approach several suitable potential buyers at the same time, negotiations: if possible with several interested parties at the same time in order to strengthen the negotiating position, execution of due diligence, conclusion of contract: clarification of all relevant points, drafting of the purchase agreement, settlement and handover.
What is a due diligence?
All relevant documents are uploaded to a protected virtual data room where they can be viewed by the potential buyer via the Internet. The volume of data is always related to the size and complexity of a company. Classically, the audit focuses on the areas of: Finance and taxes, legal, organizational and, if applicable, technical matters.
How is the price of a company calculated?
The company value is not the price, but a basis for pricing. The price results from supply and demand and the negotiations. The seller wants to get the maximum price for his business, the buyer wants to pay as little as possible. The purchase price should be fair for both sides. The purchase price should be able to be paid off after 5-8 years.
How do I achieve the maximum price in a company sale?
1. someone actively approaches you and makes you an offer. Here you have a comfortable negotiating position, especially if you are not in a hurry with a sale.
2. you systematically consider who all could be potential buyers, approach them all at the same time and then conduct negotiations in parallel with all interested parties. Competition stimulates business and drives up the price.
What can depress the selling price?
Important factors that can lead to a reduction in the sales price are: Time pressure of the seller, lack of prospective buyers, quick settlement and cash payment, disclaimer, securing the continuity of the company and jobs.
What is the task of an M&A consultant?
The main task of an M&A consultant is to establish process security and avoid expensive mistakes. The goal is to find a solution that is economically sensible, fiscally favorable and legally possible. An experienced and well-connected consultant increases the potential circle of buyers and thus the chances for a successful sale.
What does an M&A consultant cost?
After a non-binding stocktaking, during which your goals, sales strategy and support requirements are determined, a serious consultant will make you a written offer if he considers the likelihood of success to be high under the given conditions (e.g. your asking price).
Depending on the industry, company size and transaction volume, a performance-based commission of between 3-10 percent is common. Also common is a fixed component, e.g. monthly or upon reaching certain milestones. Some examples for fee models
What makes a company unsaleable?
Excessive price expectations and a business model that is not sustainable are the main reasons that can make a company unsaleable. If a company is too owner-heavy, if the business situation is continuously deteriorating, if the documentation is inadequate or does not reflect the truth, these are further reasons that make a sale difficult.
A sale under massive time pressure, e.g. for economic or health reasons, it can easily mean the end before a sale can be realized.
What is the difference between an asset deal and a share deal?
In an asset deal, the assets of a company are acquired individually. Advantage: minimization of liability risks, disadvantage: depending on the size of the company, very confusing. In a share deal, the buyer acquires shares in the company (shares, business shares or partnership shares). The advantage for the seller is that the gains on disposal are tax-privileged.