M&A Advisory: Safely to succeed

Success Stories.

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Successful company selling

Negotiating a company sale is always a complex process, which is often underestimated by sellers. Emotions and traditions come into play here; it is about deserving employees who have made success possible, about reputation and – about a lot of money. Every company is unique and special in this respect. Finding the right buyer and achieving the best possible purchase price therefore requires a great deal of experience.

The following examples give you an insight into the details of company transactions SengColl. has managed.

Beispiele erfolgreicher Verhandlungsführungen.

Unsuitable for auditors

A company was to be sold due to age. The two shareholders had consulted their tax advisor and auditor on this matter. After several unsuccessful attempts, SengColl. was finally commissioned to take charge of the sales process together with the auditor. First, a professional sales memorandum was drawn up, which made the sellers aware of the breadth of the services they provided and how valuable and well-established their customer relationships were. These and other findings led to the creation of a new website based on the structure of the sales memorandum before approaching potential buyers.

Very quickly, a strategic buyer was found who wanted to open a new location at the seller's headquarters, a state capital. The talks were positive, and the purchase price offered was good, but did not meet the WP's expectations. After several negotiations, the prospective buyer grew tired of the back and forth and abandoned the purchase plan. Although takeover opportunities are constantly being sought in the industry in question and an unusually large number of potential buyers had been contacted, no other prospective buyer was initially found for the company.

By chance, an MBI (management buy-in) candidate came forward at SengColl. who wanted to become an entrepreneur, liked the company, and was convinced that he had sufficient technical expertise. As with most MBIs, his available equity capital was limited, so the guarantee bank had to be brought on board for bank financing. A letter of intent was signed with a purchase price that was approximately 25 percent lower than that of the first bidder. However, as discussions progressed, the MBI's personal idiosyncrasies became apparent, raising concerns that he might have problems gaining acceptance among the employees. If key employees of the new owner were to resign, the company would face considerable problems.

SengColl. therefore contacted other potential buyers and came across a company that was the ideal buyer from the perspective of both the sellers and their employees. However, the buyer ultimately saw through this and offered a purchase price that was approximately 40 percent below the offer made by the first strategic buyer.

Perfekte Verkaufsverhandlung

The purchase price expectation exceeded by a factor of 3

Not knowing how to approach his gradual exit, the owner of a very small equipment manufacturing company contacted us. It turned out that the three-person company - the owner, a mechanic, and his wife in accounting - was generating excellent results.

All the know-how and customer contacts were with the owner. It was therefore clear that he would have to continue working with the potential buyer for some time. When asked what his expected purchase price was, the seller quoted approximately EUR 2.5 million. As we estimated a much higher sales proceeds, the seller offered to give SengColl. a share of the excess purchase price. This resulted in a good deal for both sides, as the company was sold for EUR 7.3 million.

Geschickte Verhandlungsführung verhindert Abbruch.

Company saved by resolving father/son conflict

The father (heating engineer, 68 years old) and his son (graduate engineer, 34 years old) had jointly managed a very successful building services engineering company for 10 years. The father owned 60 percent of the company shares, while the mother and son each owned 20 percent. The father was responsible for customer relations, the son was responsible for technology, and the mother managed the accounting. In this constellation, the son worked an average of 12-14 hours per day as well as on weekends, yet only received an average salary.

Although succession had been discussed repeatedly for years, it was never actually addressed. The fact that the son's partner was a tax advisor and the family's only son-in-law was an auditor further complicated the situation. Ultimately, the parties had also fallen out personally, and the son was on the verge of leaving the company, not least because his partner wanted a man who would devote more time to the family, which now included two children. However, the simultaneous departure of father and son would have ruined the company. Added to this was the mother's heart attack, which was due in no small part to the seemingly hopeless situation of the family and the company, in which the company was considered unsellable.

SengColl. then succeeded in finding an MBI candidate who, together with a Chinese investor who wanted to launch his product on the German market, took over the company. The father and son were retained by the company for a transitional period until all business contacts had been transferred and SengColl. had found a new managing director.

Perfekter Verkaufsablauf

With EUR 0.5 million in equity capital, to a company with EUR 100 million in sales

The shareholder of a stock corporation in the shopfitting industry with a turnover of approximately EUR 20 million had to discontinue his sales activities due to unfair practices by his managing director with a major customer and due to his own serious illness. After about two years, an MBI candidate with approximately EUR 0.5 million in equity capital contacted SengColl. He had decided to become an entrepreneur and buy a company. Until recently, he had been a member of the executive board of one of the largest companies in this industry. Ruediger Seng immediately re-established contact with the former client, whose company was still up for sale.

In the meantime, the managing director had left the company and profits had fallen sharply. The seller, who had not yet recovered, was therefore pleased to have a prospective buyer from within the industry. The MBI candidate was very interested in the purchase, but his available equity was extremely low. The house bank, which was aware of the situation of the largest company in the area and recognized the capabilities of the agile prospective buyer, gave the green light for financing the purchase price.

Since the MBI had an alternative offer for a position on the board with a salary of EUR 400,000 per annum, he had to decide on the purchase within two months. He waived due diligence because he was very familiar with the industry and, above all, the opportunities it offered.

To discuss further details, they arranged to meet at a motorway service station at the weekend, where they spontaneously signed a handwritten agreement – believing it to be merely a letter of intent. After the MBI subsequently informed Ruediger Seng of this, he had to point out to him that he had already legally acquired the company, as no notarial contract is required for the transfer of shares. Today, the acquired company has a turnover of approximately EUR 100 million.

Verhandlungsführung: Höherer Verkaufspreis

Achieved a higher purchase price through professional presentation

Two years earlier, two managing partners had already tried unsuccessfully to sell their building services engineering company through intermediaries. This failed, on the one hand, because of the asking price and, on the other hand, because the potential buyer did not want to take over the real estate and there was no agreement regarding pension commitments. When the two shareholders commissioned SengColl. with the sale, the first step was to resolve the two issues mentioned above. Only then did the search for a suitable buyer begin.

During the company analysis for the preparation of the sales memorandum, a supposed weakness of the company turned out to be a strength. In addition, another strength was identified that gave the company a unique selling point. The majority of the shareholders had a stake in a foreign company that provided qualified specialists. In view of the considerable shortage of skilled workers in Germany, this was a very important asset.

As a result, a buyer was found quite quickly who was willing to pay a purchase price that, including an earn-out, was well above previous offers. The transaction was completed by first having SengColl's client acquire the foreign company and then transferring it to the buyer together with the building services engineering company.

A disaster averted

The main shareholder of an extremely successful company commissioned SengColl. to sell his 85 percent stake. The younger co-shareholder was the irreplaceable technical and sales expert without whom the company could not have continued to operate. His continued presence in the company was therefore an essential prerequisite for finding a buyer. He himself was interested in this and wanted to retain his shares if possible. However, he also did not want to give up his usual freedoms alongside a new shareholder. In particular, he insisted on continuing to receive the unusually high remuneration he had been granted up to that point. In addition, he naturally wanted to have a say in who his future co-partner would be and whether this person could help to at least maintain and, if possible, increase the value of his stake in the coming years.

Since the seller had very specific ideas about potential buyers, a series of fruitless discussions were initially held, including with a company with approximately 2,000 employees with which business contacts already existed and which was looking for precisely the expertise of our client. This interested party commissioned the M&A department of a large savings bank to submit an offer. The savings bank calculated and justified a purchase price that amounted to half of the company's value. Even a negotiated improvement of the offer did not result in an appropriate purchase price. Discussions with other interested parties also failed due to low offers, as they also priced in the risk of the remaining shareholder possibly pulling out. Although he was an outstanding expert, he was also a man with idiosyncratic ideas. The seller had also had to deal with these for years.

Another interested party then asked the seller to simply state the purchase price he wanted. He had managed to convince him that he had been commissioned by a Chinese corporation that was worth billions to find a German company exactly like our client's. Money was no object. Therefore, he asked to be told immediately how many millions more would need to be invested. When SengColl. wanted to verify these statements, the person in question sought direct contact with the seller with the suggestion of leaving SengColl. out of the picture. Both shareholders and the prospective buyer met together with their wives for confidence-building discussions. An LOI was signed and a visit to the Chinese corporation was agreed upon, with the sellers themselves paying the flight costs.

Subsequently, our client surprisingly presented us with an LOI signed by both parties, which had obviously been drafted by the prospective buyer himself, was riddled with legal errors, and was economically inferior to all previous offers. In the interests of our client, we were able to prevent this dubious deal in collaboration with a specialist lawyer from our network of experts.

As a result, SengColl. present a strategic buyer who submitted an offer that surpassed all previous offers and who also proved to be an ideal investor in other respects. However, after signing the LOI and completing the business due diligence, the buyer announced that it wanted to review certain aspects again, that it would only be able to take over at the end of the year due to capacity reasons, and that it also wanted to have a sample produced. In addition, the purchase price would have to be renegotiated if necessary. The letter regarding this matter was also accidentally sent to the minority shareholder who was not selling. This offended the seller's pride to such an extent that he broke off the negotiations.

Less than a week later, the minority shareholder happened to meet the senior partner of the first prospective buyer at a trade fair. When asked whether the company had been sold in the meantime, he replied in the negative, and a meeting was arranged at short notice, during which all possible arguments were put forward as to why so little had been offered at the time. Within a short time, they agreed on a purchase price that was well above the initial bid and about one million euros lower than the highest offer.

Found the perfect buyer – purchase price 10 times higher

A shareholder in an engineering company had attended a one-day seminar by Ruediger Seng on the subject of selling a business. Afterwards, she reported on ongoing sales talks with a US buyer interested in her company. The seminar had left her feeling confused about the purchase price of EUR 2.3 million offered by this interested party, and she had therefore asked to hold a meeting with her five co-shareholders. The preliminary information and the website already indicated that the company was a hidden champion.

After describing the earnings situation, Ruediger Seng justified a possible purchase price of at least EUR 6 million, which the shareholders considered unrealistic. Nevertheless, the order was given to continue the sales negotiations and to look for additional interested parties. In addition to attracting further prospective buyers, the US bidder increased its offer to EUR 7.5 million in several steps.

After Ruediger Seng had delved deeper into the subject and the search for potential buyers, a listed company was identified that had just acquired a similar property in the UK at an exorbitantly high price. The target was presented to them and an initial meeting took place within a very short time. The result: the sellers received a purchase price of EUR 10 million, as well as a debtor warrant for a further EUR 10 million, provided that defined milestones are achieved in the following three years.

Transformed from seller to buyer

The two managing partners of a very solidly run company had commissioned SengColl. to find a buyer, as one of the two 50 percent shareholders wanted to retire due to his age. The younger, 58-year-old shareholder, who wanted to retain his shares, feared that a takeover would significantly change the corporate culture and that the company would no longer be as successful as before. This would reduce the value of his shares in the event of a later sale, which is why he wanted to retain the majority of shares. Since all prospective buyers who were open to a minority stake insisted on provisions in the new partnership agreement that would ultimately have secured them rights similar to those of a majority shareholder, ways were sought for the remaining shareholder to acquire his colleague's shares. Together with the company's bank, a solution was found: the seller retained 5 percent of his shares and 45 percent were acquired jointly by the limited liability company and the remaining shareholder.

If this provision had been agreed upon before SengColl. was commissioned, the transaction would have been different in terms of figures. This is because the highest bid from a buyer introduced by SengColl. exceeded the company valuation by more than 30 percent. This highest purchase price now became the basis for the transaction. Fortunately for the selling shareholder—and unfortunately for the buying shareholder.

Sale facilitated through mediation in shareholder dispute

The three shareholders of a holding company were in disagreement over the terms of the sale of a subsidiary and the continued employment of its managing director. After two unsuccessful attempts to sell the company, the third prospective buyer was also threatening to pull out due to the shareholders' disagreement.

In this situation, the managing shareholder entrusted SengColl. with representing his interests and resolving the conflict. He was on the verge of taking legal action. SengColl. succeeded in bringing the deeply divided parties to a common understanding in just one joint meeting. With the subsequent joint commissioning of SengColl. by all shareholders, a viable solution was found for both parties and the sale was successfully completed.

A restructuring case becomes worth millions

A company with outstanding products was on the verge of insolvency due to a lack of qualifications, age, and health restrictions among its management—all of whom were shareholders. In a last-ditch attempt to save the company, the three shareholders commissioned SengColl. to find a buyer. The focus was not on the purchase price, but on the survival of the company. Within 18 months, new sales activities succeeded in significantly increasing order expectations and securing an order backlog with good profit margins, resulting in several prospective buyers submitting good to very good purchase offers.

One prospective buyer submitted a signed LOI in the amount of approximately EUR 13 million. However, the condition was that the location was to be closed and the employees transferred to the buyer's company 30 km away. The sellers did not want to impose this on their employees and therefore transferred their shares at half price to a buyer with whom they already had business contacts.

Freed from family entanglements

The shareholders of a family business, the 83-year-old founder, two sons as managing directors, and their sister, were at odds due to sharply declining results at a company with approximately EUR 30 million in sales. The senior partner still sat in his office every day and pulled the strings behind the scenes together with his trusted secretary. The sons, a not very successful businessman and his brother, an engineer and salesman who wanted to change a lot, therefore had considerable difficulty asserting themselves as bosses.

The unloved divorced sister with a child, who wanted to be supported by her father and the company, caused additional problems. SengColl. was able to arrange for the engineer to acquire all the company shares together with an investor and, as sole managing director, implement his ideas and thus also save the company. Today, the company is once again in an excellent position.

Family successor saved during the financial crisis

Ruediger Seng had assisted with the takeover of a company by the daughter of the owner, who had suffered a fatal motorcycle accident. Delayed effects of the 2008 financial crisis had resulted in losses, and the bank threatened to cancel the credit lines. This would have affected not only the company, but also the mother, whose livelihood had been secured by the company. In this situation, it was possible to bring in a major industrial strategist as an investor at short notice, who acquired the majority of the company shares.

Since then, the company has been successful again and has also grown strongly thanks to the sales synergies brought in by the investor.

EBIT EUR 50,000 – sale price EUR 4 million

A service company with revenues of approximately EUR 700,000 and EBIT of approximately EUR 50,000 was sold to a strategic investor for EUR 4 million. This purchase price was based on estimated cost savings and synergy effects for this particular buyer.

For another prospective buyer with whom a letter of intent had been signed but who did not proceed, a comparable calculation resulted in a purchase price of EUR 3.2 million. Without knowledge of our purchase price estimate, the buyer submitted an offer for exactly this amount. The transaction was then completed within six weeks.

A new business model instead of bankruptcy

In January 2019, three siblings and shareholders (CEO: graduate engineer, accounting: business graduate, human resources: business graduate) commissioned us to sell their fourth-generation family-owned special-purpose machine manufacturing company with 135 employees. Sales fluctuated greatly between EUR 12 and 15 million, as did the results, which had been poor for some time. A negative result had already been forecast for the 2019 financial year. The company was financed entirely with equity capital and shareholder loans amounting to approximately EUR 9 million.

Despite our urgent warning about the expected downturn in the economic situation and the resulting threat of a decline in the value of the company, it took months to provide the documents required for the sale due to the CEO's heavy workload.

In June 2019, we held sales talks with prospective buyers who were very interested but wanted to wait and see how things developed. Prospective buyers specializing in the acquisition of companies in crisis wanted to restructure at the company's expense and – if any assets remained – give the shareholders a share in the amount still to be negotiated.

In the meantime, the sellers informed us that they had been on short-time work since January and had an order backlog of only EUR 2.4 million. Monthly personnel costs amounted to approximately EUR 800,000.

Since the company no longer had a positive prognosis for continuing operations under these circumstances, swift action had to be taken, as the managing director had already been found guilty of delaying insolvency, which would have had criminal consequences for him. To prevent this, a partial shutdown of operations was considered and calculated.

In the course of this, the service business was spun off in a timely manner, as there were warranty obligations and long-term maintenance contracts with customers. A social plan was negotiated with the remaining employees.

The property was offered for sale to the neighboring large company. As the latter was very interested in the property but could only purchase it after the liquidation had been successfully completed in order to avoid the risk of having to reverse the transaction in the event of insolvency, a letter of intent was signed with the company. This provided for the provision of any liquidity that might be required for the liquidation, which was to be offset against the purchase price of the property.

Result: We were able to prevent the worst-case scenario.

When the closure of the business was announced in the local press, letters to the editor praised the entrepreneur for taking the right measures in good time instead of allowing the business to slowly die, depleting its assets and ultimately leading to insolvency.
Most of the qualified employees who could not be transferred to the service company found new employers.
The liquidation was carried out safely thanks to a conservative liquidation balance sheet that took many possible uncertainties into account.
With the newly founded service company, the boss now generates the income that was destroyed annually by the manufacturing company in previous years.
A purchase price was achieved for the property that will ensure a comfortable retirement for all shareholders.

Sales revenue increased fivefold and insolvency averted

The shareholder of an automation technology company was considering selling his company, which was experiencing financial difficulties. However, after we were commissioned, it emerged that the main customer, a large global mechanical engineering company, accounted for approximately 60 percent of sales and an even higher proportion of earnings. For 12 years, the company had been supplying this customer with an important additional unit for its machine, into which extensive know-how had been incorporated. Currently, however, orders were stagnating and orders that had already been manufactured were not being accepted.

The customer had now attempted to manufacture this unit itself and was blackmailing our client with the demand that he sell the drawings to it. This now explained the current stagnation in the business relationship. Previously, however, our client had already learned from an end customer whom he had served under a maintenance contract that the customer was obviously unable to deliver a functional unit.

The customer appeared at the first joint meeting with three senior employees, which underlined the importance of the issue for the customer. It was also explained that the unit was to be manufactured in China for cost reasons. The very next day, the customer submitted an offer to purchase the rights and drawings for EUR 300,000.

Our position on this was based on an economic assessment of the benefits that the customer could achieve by purchasing the documents and manufacturing in China, namely by not only saving a high percentage of the manufacturing costs, but also by reaping our client's high profit margin. The bottom line for the customer was therefore a highly lucrative deal, which under normal valuation standards would have resulted in a purchase price of several million.

In order to put time pressure on the customer, who was unable to offer and sell a machine without a functioning engine, negotiations were held with potential buyers in Asia. However, these talks dragged on for a long time and a successful conclusion was not clearly foreseeable. In the meantime, the customer doubled his offer.

What the client SengColl. had failed to disclose, however, was the fact that his company had incurred such high losses in the meantime that the proceeds from the sale of the drawings were urgently needed to avert insolvency. Now the problem had arisen that considerable time pressure had built up on both sides. In addition, there was a risk that if the client learned of the client's financial situation, he would either push down the purchase price again or wait until he could acquire the documents from the insolvency administrator at a much lower price.

To cut a long story short: after several negotiations, a purchase price of 1.5 million was agreed, thereby averting insolvency.

At the very last minute

On the recommendation of a lawyer, the couple who ran a professional and successful animal boarding kennel approached us because they were unable to proceed with the sale of their business to a preferred buyer. The buyer had established a friendly relationship with the owners through occasional collaboration, and they were largely in agreement. However, the process stalled because the bank allegedly did not grant the financing commitment, claiming that the property valuation was too high. The buyers - a father, his daughter, and her partner - knew that the sellers were under time pressure and had planned to move to another state.

Our first meeting with the buyers quickly led to an alleged financing commitment, but they did not want to provide this in writing. Instead, they questioned the purchase price and were angry that SengColl. had been given the sales mandate and that we were able to bring other interested buyers into play relatively quickly.

One of the prospective buyers, an experienced manager who had trained as a dog trainer himself, recognized the opportunity and made an offer that the sellers could not really refuse. However, the sellers' personal attachment to the original prospective buyers delayed the transaction. It was believed that an agreement could still be reached on both the purchase price and other new details that were delaying the sale, which resulted in high but avoidable legal costs for both sides.

In the meantime, the interested manager had become uncertain and there was a real danger that he would withdraw his offer to sell. We therefore urged the sellers to decide in favor of the manager so that the sale could be completed before the end of the year, as the difficult economic development of the following year 2020 was foreseeable.

As the manager was experienced in transactions and acted pragmatically, the notary appointment was actually able to take place in December. The second purchase price installment was due at the end of February 2020, and one month later the lockdown began! The sellers had received the full purchase price and had moved to North Rhine-Westphalia.

Wrong decision

At the beginning of 2019, we approached a successful technical building services company regarding a possible sale. We were then invited to a meeting and received expectantly by the three shareholders, who presented the company's situation as follows.

The three active shareholders of the highly successful company wanted to arrange their succession and leave the company in the foreseeable future. Only one of the shareholders had family successors, two sons who were already working in the company and who were to or could take over the management. However, a takeover of the company shares by the two sons was not possible due to the high purchase price expectations that had been determined by the commercial managing director.

After we explained the procedure for selling a company - either you hire an agent to represent the seller's interests, or the consultant represents the prospective buyers and is also remunerated by them - the decision was made to go with option two, on the grounds that they could handle it themselves. “If you have a buyer, you can bring them by.”

To address potential buyers, we created an anonymized fact sheet and were quickly able to hold initial discussions with four prospective buyers and the shareholders. Based on the figures provided by the commercial managing director, three of the interested parties submitted indicative offers, which, however, did not initially meet the sellers' expectations. Nevertheless, discussions were intensified with two of the prospective buyers who were otherwise ideally suited to the company, and the offers were adjusted until a letter of intent could be concluded with one of them.

In the meantime, however, the economic outlook had already deteriorated. In particular, the company's main customer, on whom it depended for 50 percent of its sales and to an even greater extent for its earnings, had reduced its orders. Furthermore, during the due diligence process, the sellers' auditor determined that the figures provided by the commercial managing director had been presented too positively due to incorrect interpretation. This also called into question the target figures for 2020. Despite all the concessions made by the prospective buyer, the commercial managing director in particular insisted on the purchase price agreed in the LOI. The result: the prospective buyer withdrew. The renewed involvement of other prospective buyers was also unsuccessful.

So what happened next? The company's lawyer was consulted, who, as expected, recommended hiring a consultant - naturally, for his own safety, the most expensive German M&A consulting firm. The firm did what we had also recommended, namely to initiate a professional sales process, but at double the cost.

In the meantime, there was COVID-19, the lockdown, and an uncertain future. These were factors that only had a negative impact on the purchase price. Nevertheless, the sale had to be completed now, as the technical managing director had already retired due to his age and his two fellow managing directors were also planning to retire. Furthermore, it was impossible to predict whether the economic situation would deteriorate further and reduce the purchase price even more.

Conclusion: You only sell your company once, and you shouldn't start cutting corners on what is usually the most important business transaction of your life. This is truly the worst possible time to do so. Instead, you should have an experienced advisor at your side to ensure that the transaction runs smoothly and that you get the best possible purchase price.

Time is money - a lot of money

The following transaction shows how important it is for a seller to hire a professional M&A advisor who can point to a long history of deals, i.e., who has built up a large pool of potential buyers over the years that they can draw on at short notice.

A well-known engineering company with double-digit sales had run into difficulties due to COVID-19 because orders from two important industries had suddenly dried up. Since the entrepreneur had almost always been able to finance his activities and growth from cash and banks were therefore only involved on the credit side, he decided against a risky restructuring and opted for a sale instead.

In times of falling EBIT, it is extremely difficult to find a buyer who acts quickly, is willing to take the recognizable risk, and believes in a prosperous future. However, as we have an extensive pool of prospective buyers whose investment goals and financial capabilities we know, we were able to present three concrete prospective buyers within a very short time.

After one of them withdrew from the negotiations, a letter of intent was negotiated with each of the two remaining parties. Both offered a respectable purchase price. One in conjunction with an earn-out (debt obligation), the other in combination with a vendor loan, each amounting to approximately 30 percent of the purchase price.

To cut a long story short, the latter was awarded the contract. Contrary to usual practice, the purchase agreement was drawn up by our client's in-house lawyer and signed before the end of 2020. The closing took place in January 2021.

If, during the six-month negotiation period, EBIT falls from EUR 2.6 million to EUR 2.2 million and threatens to slump even further, approximately EUR 20,000 of the purchase price is lost every day due to the multiple used to determine the purchase price.

First impressions count

The long-established family business, now in its second generation, operating in the metalworking sector with a focus on flame cutting and grinding thick sheet metal, was to be sold due to the owners' advancing age. Sales amounted to approximately EUR 4 million and, despite the lack of a sales department, the operating profit was around 10 percent. The three shareholders were already over 60 years old. The youngest was the managing director and operations manager, while the oldest worked full-time as a consultant for calculating quotations and commercial matters. The third shareholder had run his own business in the same building, but this had been discontinued and the production and storage areas were therefore vacant. The production processes of both companies generated a considerable amount of dust and smoke, which, due to a lack of adequate dust extraction equipment, had led to significant contamination of the production rooms and windows. The strain on employees caused by the dusty environment was also clearly evident. The average age of the long-standing employees was also above average. Prospective buyers naturally had to ask themselves whether it would still be possible to find skilled workers for this type of work and this working environment.

Despite the coronavirus pandemic, the results remained satisfactory and were expected to rise again. However, despite low purchase price expectations, several prospective buyers who were approached were not enthusiastic about the project. The preliminary discussions were consistently positive and promising, but after visiting the site, none of these interested parties wanted to make an offer to purchase. To make matters worse, the shareholders' tax advisor had created tax-optimized structures that resulted in low reported profits. The actual earnings therefore had to be presented through adjusting side calculations, known as normalizations, which further unsettled the prospective buyers.

Ultimately, the company was taken over by a fellow entrepreneur who anticipated significant synergy effects from the transaction. The purchase price was extremely low because the buyer had calculated an investment backlog of EUR 1.5 to 2 million. Unlike the other prospective buyers, this buyer was able to raise the capital for the renovations.

Conclusion: No buyer decides to purchase a company solely on economic grounds. Therefore, they should gain an impression during their first visit that does not disappoint their expectations and inspires them to further develop the purchase object and create a future success story. Entrepreneurs who want to sell their life's work do not have to go to great lengths to spruce it up. However, they should ensure in good time that the overall impression does not lag behind the economic figures.

SengColl. as an anonymous door opener

An entrepreneur contacted due to possible interest in selling responded that he did not want to sell, but instead wanted to buy in order to expand his activities. He already had four targets in mind and commissioned SengColl. to approach them about their possible interest in selling.

One of these target companies - with which business contacts already existed - showed interest in SengColl.'s approach, as one of the two shareholders wanted to retire and a replacement had to be found. Within a short time, a meeting was arranged, at which it became clear that a takeover by SengColl.'s client would be advantageous for both the buyer and the seller. Everything necessary was arranged at short notice and the transaction was successfully completed within four months.

Large sole proprietorship – a complex sales process

The owner of a highly successful sole proprietorship in the field of technical building equipment with a turnover of EUR 10 million was approaching retirement age and needed to arrange for a successor. Following a beauty contest, SengColl. was entrusted with the execution of the transaction. As SengColl. has had excellent contacts with buyers in this industry for many years, a large number of potential interested parties were approached, five of whom signaled concrete interest in purchasing and, after exchanging NDA, received the sales memorandum prepared by SengColl. This was followed by initial discussions with four interested parties via video conference, all of which were positive. After exchanging further information, purchase offers were submitted, but these varied greatly in terms of purchase price.

There were various reasons for this: in one case, the necessary equity capital was lacking; another interested party was already in the process of purchasing a larger target; and the third party was trying to get a bargain. The eventual buyer, a strategist, offered by far the best purchase price, as the company being sold was highly valued in terms of both its location and its customers.

However, what both parties underestimated was the complexity and the effort required to sell a sole proprietorship with project business of this size as an asset deal. The originally scheduled transaction period of 9 months ultimately turned into 18 months. It was ultimately thanks to the commercial lawyer from the SengColl. competence network that the project did not fail, as even the very experienced buyer and his advisors had problems with this.

An additional difficulty was the question, which was assessed differently by the parties, of whether the tax advantages of discontinuing the business of a sole proprietorship could be realized with the agreed deal structure involving a re-participation and an earn-out. This will ultimately be answered by the tax audit that has already been announced.

Entrepreneur saved from delaying insolvency

The shareholder of an automation technology company expressed interest in selling the business at the request of SengColl. However, during the initial meeting, it became apparent that although the company had achieved excellent EBITs in the past, its results were negative due to delivery delays last year and currently. Upon reviewing the figures, it also became apparent that the company was already in a problematic situation of delayed insolvency for the sole shareholder and the company.

As SengColl. has a large international network of prospective buyers for a wide range of industries and knows their search focus, it was able to present a suitable buyer in the form of an Austrian family holding company within a few days. Just three days later, the first personal contact was made, during which a short-term takeover was envisaged. The buyer quoted a surprisingly high purchase price, which was based on a limited negative result in the current financial year and a future earn-out. The shareholder was to continue managing the company for another three years.

Since swift action was required in mid-November, not only because of the time of year but also due to the prevailing crisis situation, it was necessary to make the next steps as lean as possible. It was very helpful in this regard that SengColl. was able to call on a commercial lawyer from its own network of experts who had worked as an insolvency administrator for many years. His expertise ensured that risks on both the seller and buyer sides that could have led to a possible reversal of the transaction – and worse – could be eliminated. Under the time pressure at the end of the year, the seller's tax advisor and the buyer's auditor were unable to cope with the highly complex situation on their own.

With active support and special measures on the part of the buyer, the transaction was successfully launched after the signing of an LOI and a management meeting.

Resolved from difficult US investment

A highly successful, internationally active entrepreneur, whom we had already introduced to a target years ago, commissioned us because he wanted to buy a company for his son-in-law - his daughter ran her own company - where the latter was already working. It was a small manufacturing company near his location, with which certain synergies could be achieved.

It was owned by a US investment company. The managing director had a comparatively high-paying employment contract with a notice period of four years. Earnings were modest, as there were supply relationships with the US parent company.

Our initial contact led to a positive response, so negotiations could begin.

Our client was very keen to buy, but had little knowledge of the details of a corporate transaction. He finally realized that his estimated purchase price had to be determined by assessing the complex economic circumstances.

Since the company's current financial figures were required for this purpose, the managing director had to be involved. However, he was not allowed to know who the prospective buyer was, as he knew that his employee was the buyer's son-in-law.

Once a purchase price had finally been agreed upon, our client had his in-house lawyer draw up a purchase agreement. When this was finally ready after a long delay, it became apparent that it did not reflect the complexities of this transaction. It turned out that this was the first company purchase agreement this law firm had ever drawn up!

While our network partner was drafting a new purchase agreement, the target's earnings situation deteriorated significantly, requiring renegotiation.

All's well that ends well. The final purchase price differed only slightly from our client's estimate.

Twice as satisfied

The buyer from our Success Story No. 20 - an automation technology company - was so satisfied with our service that he commissioned us again. This time, we were asked to contact metalworking companies in the surrounding area, one of which acted as an extended workbench for him, among other things.

We succeeded in getting the two shareholders of the latter company, one of whom was the managing director, interested in the topic of “sale.” The difficulty here was to prevent them from rejecting the offer when the prospective buyer was disclosed, because who wants to reveal to a customer that they are willing to sell their company!

As our client was known as a young and dynamic entrepreneur, a joint meeting was quickly arranged on site. The managing director, who was in his late 50s, recognized that this would offer development opportunities for the company. His fellow shareholder recognized the chance to increase his initially small investment more than tenfold.

We submitted a fair offer to the profitable company with a comprehensible justification and calculation of the purchase price. That was the end of our contribution to the transaction. The buyer and seller agreed on this purchase price and signed a letter of intent. Our final input was to point out the possibility of how our client could save a considerable amount of tax by using an appropriate structure to acquire the shares. Our client and his lawyer took care of the rest of the transaction.

After only six months, the transaction was completed. As with the first time, our six-figure contingency fee was in our account two days after we invoiced it.