Taking over a company in 6 steps
- Jelle van der Walle
- How to
- 22 Mar 2023
- Edited 8 Dec 2022
- 3 min
- Selling and takeovers
Taking over a company does not start with you approaching a seller. You need to do some preparation first. You start with your personal ambitions and possibilities. From the first step until the final signature; if you know what to expect your enthusiasm will grow, and so will your chances of success. These 6 steps can help you achieve this.
1. Identify what you want
To get a clear picture of what you are looking for it can help to create a profile of the type of buyer you are. Find out what your purchase preferences are. Do you have experience in a specific industry? Then it might make sense to look for companies that are up for sale in that industry. Or do you want to go into a new direction?
Creating such a profile includes asking yourself questions. In what region are you searching? Do you plan to reorganise a company (which means a low takeover bid) or do you want to buy a client portfolio so you can start immediately? And what are your financial options?
Get a clear picture of your ambitions and options. That way, you can target your search for the right company. This preparation is essential, whether or not you know the seller personally. It can help you make the right decisions at a later stage.
2. Find the right company
Is the potential seller not your employer, someone from your network, or family? Then you have to start your search elsewhere. Sellers have many options to display their companies. Through data (in Dutch), sector (in Dutch), commercial property agents, , or , for example. Start your search there.
Use the profile you created in step 1 to make a shortlist of the sellers you find. Then approach the sellers, either anonymously or through an advisor. Also look at the route* (in Dutch) a seller takes. This way you understand the motives of everybody involved in this process.
3. Negotiate with the seller
You have initiated contact. Naturally, a seller appreciates it if you have done your homework. Sometimes the profile from step 1 is a condition for entering negotiations. If you come well-prepared, the seller will feel more inclined to share the predominantly confidential information about their life’s work.
The seller should come thoroughly prepared as well and have all the information available during the meetings. Information about turnover, personnel, client base, stock, location, trademark right, option of continuation of the lease of the business premises, and supporting figures for the asking price, for instance. In short, information you would find in a sales brochure. This is also called a memorandum .
Generally, a declaration is drawn up. This can serve as a basis for the takeover purchase contract. It contains agreements about the negotiation procedure, exclusivity, and . With a declaration of intent you and the seller know exactly what is involved during the negotiation process. It will also help prevent disputes.
Look into other aspects of the takeover as well. Examine whether there are any product liability cases, ongoing court cases, claims, debts, or any other matters not included in the memorandum of sale.
During the negotiations there is a lot going on. Even if you and the seller click, and you both want this takeover to go ahead. Both parties will ask critical questions and emotions also play a role in the negotiation process. We therefore recommend that you hire a takeover specialist or accountant for the negotiations. Their expertise, experience, and creativity will ensure everything runs smoothly. For more information, take a look at this summary of takeover specialists (in Dutch).
4. Financing the takeover
You made your decision. The company of your choice suits your purposes and is financially interesting. But is it also financially feasible* (in Dutch)? Obtaining the funding you need can be quite a puzzle. Luckily, one that is usually easy to solve because there are some interesting (in Dutch). Not to mention the many that you and the seller can agree on. For example, a temporary partnership in which you use your future profit to pay part of the acquisition price.
5. The final stage
All lights are green and the takeover can go ahead. Nevertheless, there are still matters that have to be dealt with and put down on paper. For example, you must investigate the financial statements of the company. This is called due diligence. And you must not forget to prepare the sales contract, inform the customers and business partners, and register your company with the Netherlands Chamber of Commerce KVK.
Please note: Does the company have employees? Then you must take over as well. You are not allowed to change their rights and obligations.
6. After the takeover
Now you know what to do to achieve a smooth takeover. You understand the figures, prognoses, and facts of the company you are buying. Lights are green and you can start as the new owner. Next comes the actual practice. This may not be what you expected. In a positive way, because turnover is showing an upward trend due to your fresh spirit. Or in a negative way, because suddenly obligations present themselves that did not show from the seller’s balance sheet.