Selling your business to an investor

Have you identified your business successor yet? This is an important matter, determining the future of your company, management, employees, and perhaps even the region. More and more entrepreneurs are looking for an external candidate, because no one in the family or company is willing or able to fill that role. This means you have to start looking at the alternatives for external succession. Investors are playing an increasingly significant role in this respect.

Which Type of Investor Suits You Best?

More and more SME transactions involve investors. There are different types of investors, differing in financial strength, strategy, and their role in the company. Choosing the right partner is the first important step towards selling. Obviously, the different goals and strategies of investors have an impact on your business. Therefore, to make your vision for the future of your business a success, it is important to understand these differences. We list them here:

Private Investors

These are private individuals or family offices, who value long-term security and the continuation of a company’s existing strategy. They prefer stable, established businesses and are not looking for immediate returns. Therefore, this type of investor is a good match for entrepreneurs who put continuity first and wish to grow with fresh capital.

Financial Investors

When picturing a typical investor, most entrepreneurs probably think of this category. Financial investors, such as private equity or venture capital, have a shorter strategic horizon. They focus more on expected returns over a certain period. For the acquired company, this often means rapid growth, through restructuring or streamlining operations. Because of their financial power and sector knowledge, these investors can respond quickly to the market and implement innovations. This makes them the ideal partner for companies looking to change quickly. The same applies to entrepreneurs who are open to change and want to benefit from rapid growth, for instance, as part of a pre-exit strategy.

Strategic Investors

Companies within the same sector or adjacent sectors want to use synergies to reinforce their market position through strategic investments. They usually have a long-term involvement in the acquired company. They look for companies that give them access to complementary products, technology, or markets. Synergies stimulate growth and innovation and secure their position in the market for the long term. Some companies follow a buy-and-build strategy and make several strategic business acquisitions to optimise synergy effects.

Success Factors in Selling to an Investor

The sale of your business and your exit require careful planning. Do you want to step back from the company immediately, or would you prefer a gradual exit while benefiting from the company's growth through a pre-exit? An immediate exit ensures a quick transition to a new situation and gives you immediate access to the full purchase price. A pre-exit makes the transition easier, ensures continuity, and potentially yields higher returns. Besides your personal preference, the current market position, the company's financial health, and growth opportunities are taken into account in determining the best timing.

Equal attention should be given to determining the value of the business. It is a complex process involving, for example, analysis of financial statements, market conditions, and growth potential. Professional support is invaluable. Negotiating with potential investors requires a clear understanding of the company's value and strategic objectives. Good advice also pays off during the negotiations to ensure a good balance between your interests and those of these highly experienced buyers.

Want to find out what the value of your company is? Fill in the Marktlink Multiple.

The legal and financial aspects of a business sale are unknown territory for most. Professional assistance is essential in successfully managing due diligence, complying with legal requirements, and limiting tax consequences.

Solid Planning Leads to Success

Selling to investors requires thorough analysis and careful strategic planning. We are happy to support you in developing a targeted sale strategy and preparing your company for the sale process. Using our international network, we will look for suitable investors and bring the negotiations to a successful conclusion. You can rely on our experience and the expertise of our international team. Contact us.