When, as an entrepreneur, you decide to sell (part of) your business, it is natural for you as a seller to strive for the highest possible proceeds. However, the question is, how do you ensure that the sales process runs efficiently and that you are able to utilize the full value of your company?
Operational improvements
First, it is essential that the operational aspects of your business are fully in order and that your business can withstand dynamic (market) developments. A good example of this is the sale of Groveko, a former participation of MKB Fonds, to the listed Bunzl. During the corona crisis, Groveko's management worked closely with MKB Fonds to implement 53 cost-saving measures. These measures resulted in a significant reduction in operating expenses (OPEX), which fell from 31% of revenue in 2019 to 23% in 2022.
In addition to these cost savings, Groveko also made other operational improvements before starting the sales process. For example, the business obtained the distributorship with Gausium in the Netherlands, allowing AI-powered cleaning robots to be offered, which became a commercial success. A clear commercial focus was also made on profitable clients/customer segments and cash flow was well managed. In addition, Groveko introduced service contracts and developed the "Groveko Smart Delivery System" (GSDS) app. This full-service business model, including 24-hour service and maintenance, ensured that clients were completely unburdened. Businesses that perform well operationally as well as have a clear and realistic growth plan typically attract more interested buyers and are offered better terms.
Identify the appropriate buyer(s)
When the operational aspects of the business are solid, it is time to initiate the sales process. Bunzl showed interest as a potential buyer of Groveko even before the process was initiated. Nevertheless, MKB Fonds decided to first engage a sales advisor with extensive experience in the industry, which allowed it to be well prepared to write to several potential buyers. A crucial step here is to identify in advance the potential buyers who are a good strategic fit for the company and also can often offer the best terms.
Preparing for Due Diligence
After agreeing on the outline of the transaction, a Letter of Intent (LOI) is signed. This is a formal document in which the seller and buyer establish the basic terms of the proposed transaction. Signing the LOI marks the beginning of the Due Diligence (DD) process, in which the buyer conducts a thorough assessment of the financial, operational, legal and commercial aspects of a company. For publicly traded businesses, such as Bunzl, this process is often particularly extensive and detailed.
As a board/shareholder, it is essential to be well prepared for this process by having the right and detailed information in a timely manner. In Groveko's case, for example, we were able to provide detailed revenue, margin and volume statements at every level (customers, products, product groups, etc.) on a monthly basis. This level of transparency and preparation gives the buyer confidence in the organization and data provided. In addition, it ensures that the DD process does not drag on unnecessarily. This minimizes the risk of renegotiating the terms agreed upon in the LOI and increases the likelihood of a successful conclusion of the transaction.
Conclusion
Combining all of these elements - operational optimization, identification of the right buyer and thorough preparation for the DD process - enables you as a seller to be able to get the maximum value from selling your business. Without this preparation and optimization, the terms of the sale can be significantly less favorable or, based on the DD process, it may be concluded that the price needs to be renegotiated. In the worst case, this may even lead to the cancellation of the entire sale. In short, adequate preparation for selling your business is crucial to maximizing de ondernemingswaarde.
