A guide to taking over a company

1. Create a buying profile

Before you start looking, make a buying profile. This is an overview of what you are looking for in a business. For example, ask yourself these questions:

• In which industry or sector do I want to work?
• Which region would be most suitable for me?
• What sort of atmosphere and working style am I looking for?
• How big should the business be?
• Do I want a business with or without staff?
• Does the business need to be able to grow?
• How much money do I have to spend?

With a buyer’s profile, you will know exactly what you’re looking for and be in a stronger position when negotiating.

2. Find a business

You can find businesses for acquisition through databases, industry organisations, and acquisition specialists. Have you found a business that suits you? Check who you are doing business with beforehand. Use KVK’s Business Register to do so. If everything looks good, an acquisition adviser can help you get in touch with the seller.

There are 3 different ways to acquire a business:

1. If you are taking over a business where you have not worked before, this is called a Management Buy In (MBI).
2. Perhaps your employer is looking for a new owner for their business. You can then buy out the owner. This is also called Management Buy Out (MBO). An advantage of this is that you already know the business well.
3. Taking over a family business, for example, from your parents or another relative.

3. Ask for the sales memorandum

If you have found an interesting business, you need to find out how it is doing. What is the turnover and how much profit does the business make? What are the costs and how many customers and suppliers will you have to deal with? If the owner rents a business premises, you can often have the contract put in your name.

This information is usually contained in a memorandum of sale. This is a document with all the details about the business. With the memorandum, you know what you will get for your money. But also pay close attention to things that are not in the document, such as financial risks, or municipality plans around the location of the business. Also look carefully at what the sales memorandum says about staff. Is there any information missing? If so, ask for it. Also have the memorandum read by an acquisition adviser.

You usually only get such a sales memorandum when there is serious interest. Often, the seller will also want you to sign a non-disclosure agreement (NDA).

4. Make good agreements

Are you in talks with the seller about the takeover? A declaration of intent sets out the key agreements. It is advisable to have the declaration of intent drawn up by an expert, such as a lawyer.

The declaration of intent includes, for example, agreements on confidentiality, how the value of the business will be determined, payment, and the timetable for the takeover. You decide together what else should be included.

A declaration of intent is not usually fully binding. This means that not all agreements are binding. However, certain provisions, such as the duty of confidentiality, are usually binding. As long as a definitive purchase agreement has not yet been signed, either party may withdraw from the negotiations. Have many agreements already been reached? If so, withdrawing may have consequences.

5. Due diligence

Before the sale becomes final, conduct due diligence. This is the obligation of the buyer to check whether the seller's information is correct and complete. This will help you determine the opportunities and risks associated with the takeover. Always ask an accountant or tax adviser for help.

At the very least, check that the figures are correct and find out which contracts are in place. The seller is obliged to provide accurate information.

If you take over a business, you also take over the employees. See what you can find out about that. How many people are employed and how many hours do they work? Are there any staff members on long-term sick leave? Do you discover risks during your due diligence? Then find out what the takeover implications are and renegotiate.

6. Assess the asking price

Has the seller set a price? If so, you will need to assess the value of the business. To do this, you can seek the assistance of a valuation expert or an adviser for business transfers. You will need to consider 3 factors: financial data, expectations and goodwill. 

Financial data

This financial information will help you to better assess the value of the business:

• Turnover and profit for recent years (financial statements covering at least 3 years)
• Assets, such as a company car, equipment, or property
• Any debts
• Current contracts with customers and suppliers
• (Long-)term lease agreements and other payment obligations

Expectations

You know the business's situation and figures at the moment. Also estimate the situation of the business after the takeover. Do you plan to make adjustments that will increase turnover? Or, are you at risk of losing customers? The previous owner has built relationships with customers and suppliers, but will they also want to do business with you?

Goodwill

When taking over a business, you will encounter the concept of goodwill. This is the additional value of a business that is not immediately apparent from the figures. Think of a good reputation, loyal customers, business contacts, and experienced staff. This is known as business goodwill.

There is also personal goodwill. This depends on your personal qualities as an entrepreneur. For example, if you are a massage therapist with a unique approach. This value is not usually taken into account, as it is uncertain whether it will remain after the takeover.

7. Arrange your financing

Are you unable to pay the asking price (in full) yourself? Then you need financing from, for example, a bank or investor.

Make a list of what you need in advance. This will help you choose the right type of financing. Common types include: 

• A business loan, for example from a bank
• Microcredit
• Crowdfunding
• Funding from investors, such as a business angel
• Borrowing money from friends or family
• Financing from the seller

You can also combine the different ways of financing. This is called a financing mix (stapelfinanciering). Make sure you set out the financing arrangements clearly to avoid any problems.

8. Draw up a takeover contract

Are you and the seller in agreement? Then it is time to draw up a takeover contract and the transfer can begin. In this contract, you set out, amongst other things: 

• the price
• agreements and obligations
• guarantees
• what will happen to the business’s assets, such as equipment and stock

It is also important to think carefully about what you are and are not taking over, such as the business premises, intellectual property, licences, and current contracts for services such as telephone and internet.

You can use the declaration of intent as a basis for drawing up a takeover contract. You may wish to seek assistance from a takeover adviser. You should also consider having the contract thoroughly reviewed by a legal professional and/or having it drafted by one.

9. Change the KVK registration

Change the registration of the business with KVK. Via 'Take over or transfer a business', indicate the changes and make an appointment. Together with the current owner, you fill in the necessary forms. You visit the KVK with these forms to finalise the takeover.

Please note: Are you taking over a eenmanszaak or a VOF? In that case, the business will be assigned a new KVK number. You will also need to make an appointment with us to register the new business in the Business Register.