Selling or acquiring a company through a phased acquisition? Here's how it works!
A phased takeover is a commonly used solution for business acquisitions or -sale When financing poses a stumbling block for the buyer, instead of acquiring the company all at once, the acquisition is spread over a longer period. This offers advantages for both buyer and seller, such as flexible payment options and the option to complete the acquisition in stages.
Why consider a phased acquisition?
1. Financing and risk management
The phased acquisition offers the buyer the option to complete the acquisition in tranches. finance, making it easier to raise the necessary funds. This reduces the risk for the buyer, as the payment is spread out and the company has time to build the necessary value.
2. Seller Involvement
In a phased acquisition, the seller often remains involved with the company. This ensures that the seller's knowledge and expertise are retained, which is important for the company's continuity. This can be reassuring for the buyer, as the seller can actively contribute to the transition and business operations.
3. Securing value for the seller
A phased acquisition allows the seller to retain some of the company's value, even if a complete sale is not possible. It also offers the seller the opportunity to complete the transaction in stages, increasing the likelihood of ultimately selling the entire company.
Operation of the phased takeover
The phased acquisition is particularly attractive for buyers who are unable to finance the full acquisition amount immediately, such as MBI'ers, MBO students or at family transfers. It allows them to acquire the company in stages, leveraging the company's expected performance to secure future financing. Here are the key features:
Buying shares in parts
: In the first phase, the buyer purchases a portion of the company's shares or assets. The remaining portion is acquired later, often in several phases, based on predetermined terms and performance.
Seller Involvement
: During the phased acquisition, the seller often remains a shareholder and remains involved with the company. This provides the buyer with access to valuable knowledge and customer relationships, while the seller ensures the necessary continuity.
Spread financing
: By splitting the acquisition payment into tranches, the buyer has the option to finance the acquisition in phases. This reduces the pressure on available resources and makes the transaction more financially feasible.
Step-by-step plan for a successful phased takeover
1. Determine the acquisition structure
It's important to clearly agree on the structure of the phased acquisition, both for the payment and the transfer of shares. This helps prevent future misunderstandings and ensures clarity about the agreements.
2. Make clear agreements about decision-making
Because the seller often remains a shareholder, the buyer and seller must make clear agreements about who has authority to make which decisions during the phased acquisition. This prevents conflicts regarding the company's operations and strategic direction.
3. Set the term and conditions
The duration of the phased acquisition must be realistic. It's essential to make clear agreements about the timing of payments and the terms for the remaining shares. This ensures both parties know where they stand and prevents uncertainty.
4. Ensure clear contractual agreements
To avoid problems, buyer and seller should make clear contractual agreements in advance about the terms of the phased acquisition, including any performance criteria or milestones that must be achieved for the second payment.
Benefits of a phased acquisition
Copper
Reduced risk
:The buyer can finance the acquisition in stages, making the risks more manageable. They don't pay the full amount upfront, but only for the portion they acquire at the time.
Seller Involvement
: The salesperson often remains involved with the company, preserving knowledge and customer relationships. This can smooth the transition and reduce the risk of miscommunication or customer loss.
Seller
Security of value
: The seller can secure some of the value of his company even if the buyer is unable to pay the full acquisition price at once.
Greater chance of complete sale
: The phased acquisition increases the likelihood of a full acquisition eventually occurring, especially when the buyer does not have sufficient resources for a full transaction.
Disadvantages of a phased takeover
Copper
Higher final costs
: If the company performs well, the buyer may ultimately pay a higher price than the original offer. This can increase the total cost of the acquisition.
Complexity of the scheme
: Drafting a phased acquisition can be complex, especially when there are uncertainties about the future performance of the company.
Seller
Longer involvement
: The seller often stays involved with the company longer, which may mean postponing his desire to take a slower pace of life.
Uncertainty about future payments
: If the agreed-upon performance isn't achieved, the seller may receive less than expected. This can pose a risk, especially if the company's future is difficult to predict.
Tips for a successful phased takeover
The phased acquisition process requires careful planning and clear agreements. Here are some tips to increase the chances of success:
Determine the right acquisition structure
: Ensure the phased acquisition structure aligns well with the needs of both parties. This prevents misunderstandings and ensures the agreements are achievable.
Make clear agreements about decision-making
: Determine in advance who has authority to make which decisions during the phased acquisition period. This prevents conflicts and misunderstandings about business operations.
Be realistic about the timeframe and conditions
: Ensure that the timeframe for the phased acquisition and the terms for the remaining shareholding are feasible for both parties.
Ensure a solid legal and fiscal foundation
: Ensure that the phased acquisition is properly documented, with clear contracts that define the rights and obligations of both parties.
Why choose Match Plan?
At Match Plan, we understand that a phased acquisition presents both opportunities and challenges. Our experts can help you with:
- Determining the right acquisition structure.
- Negotiating the terms of the phased takeover.
- Guiding the process from start to finish to achieve a successful transaction.
- Ensuring a solid legal and fiscal structure.
Contact us and discover how we can help you successfully realize a phased acquisition.
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