Finding funding for a business takeover

Ways to finance a takeover

You can finance a takeover in different ways. In most cases, you combine financing forms. This is called stacked financing or a financing mix. The most common forms of financing for a takeover are:

• a business loan or microcredit
• investment
•  crowdfunding 
• financing from the seller.

 A specialist financing adviser with the quality mark Erkend Financieringsadviseur MKB (Approved SME Financing Adviser, in Dutch) can help you with this.

Use the Financing Finder tool

The Financing Finder will will help you discover which types of financing suit your business plans. Answer the questions in the Financing Finder Tool and you will see which types of financing are of interest to you and which financiers offer these types of financing. 

Special forms of financing for business takeovers

Sometimes there are special forms of financing available in a business takeover. The seller provides these forms of financing.  You and the seller make an agreement with each other.

Subordinated loan from the seller

The seller can provide the buyer with a subordinated loan (achtergestelde lening). This means that the seller leaves money in the business. In the event of insolvency, this loan is only repaid once other loans have been settled. The amount is ususally treated as if it were equity. This increases your equity, making the key financial ratios (balance sheet ratios) look much more favourable to other lenders.
The seller takes on more risk in this arrangement and must therefore have confidence in you as the buyer. For other financiers, this is a positive sign. An example of a business acquisition involving a subordinated loan from the seller can be found in the calculation examples below.

Profit entitlement

With profit entitlement (winstrecht), a profit-sharing agreement, you agree that the seller will receive a pre-agreed percentage of the profits for a number of years. This reduces the purchase price for you and means you need less financing. You can finance the portion of the purchase price that you have to pay immediately through a lender or perhaps from family or friends. You can find an example of a purchase with a profit-sharing agreement in the calculation examples below.

The earnout arrangement

With an earnout arrangement, you only pay (part of) the takeover price if you achieve the predetermined turnover or profit target. An earnout is particularly suitable if the takeover fee includes a large amount of goodwill. Goodwill is difficult to finance. It is the difference between the takeover price and the book value of the company. Usually, it is the invisible value of a business. For example, its good reputation, a large customer base, or a unique recipe that makes a bakery stand out. The benefit of the earnout arrangement is that you only pay the goodwill if you achieve the previously agreed targets. You can find an example of an acquisition involving an earn-out arrangement in the calculation examples below.

Hire purchase

With hire purchase (huurkoop), you rent or lease the business. The business is yours only after you make the final payment. That means you do not have to finance the purchase price. You pay it from the proceeds of the next few years. Keep in mind that the business is not yours yet during the hire purchase period. You can find an example of a hire-purchase takeover in the calculation examples below.

Gradual takeover

You can also opt for a gradual takeover. This can be done in various ways. The legal structure of the business, for example, eenmanszaak or BV, will affect how this is done. You must cooperate with the selling party during the takeover. This can be a disadvantage. For a gradual takeover, always ask for guidance from a specialist, such as an accountant or tax adviser.

Help with business financing

The Financing Guide helps you find your way in financing your business. Do you still have questions? Call the helpline on 088 585 11 11 or ask an expert.