When you are planning to sell your company
First, determine the strengths of your company and reinforce them. Remove all personal aspects from your company and make it a neutral target of sale. Note that it can take up to years to get your business ready for selling.
Your company is fit for sale when its business operations are not dependent on you. In addition, the operations must be profitable, products must be good and customer relationships must be healthy.
Find out whether you should sell your company through a share transaction or business acquisition. Carefully investigate the benefits, disadvantages, costs and taxes associated with these options. If you are a private trader, only a business acquisition is possible.
Set an appropriate price for the company. Remember that a company’s purchase price is always a compromise. The price is usually correct when you get sufficient compensation for your company and the buyer can make the purchase price back in two to five years. Learn more about company valuation
Put together all your company’s documents for the past three years for the buyer. An up-to-date document portfolio with all the basic information establishes trust and makes it easier to make a purchase decision. Conclude a non-disclosure agreement before disclosing the information to the buyer.
Get help with the sales process from your regional business development company, corporate brokers, legal experts or your accounting agency.
You can only sell your business in a share deal if it is a limited liability company, a limited partnership or a general partnership. If you are selling your company in a share deal, you can sell the whole business or part of it.
In a share deal, the buyer acquires the shares of your company as well as the rights and obligations associated with them. In most cases, the machinery, equipment, premises, customers, personnel and the name of your company are transferred to the buyer. The buyer also acquires the financial and legal liabilities of your company, as well as its risks. The company continues its operations as before under a new ownership.
A share deal is a transaction involving the shares of your company that are owned by you personally. In other words, your company does not sell shares and the sale does not have any effect on the company’s financial results, taxation or other business operations.
When selling the shares, you only pay the capital gains taxes that you must pay personally. In a generational transfer, you may be granted relief for the capital gains taxes. In fact, in terms of taxation, a share deal is often more advantageous to the seller than an asset deal. Moreover, in a share deal, you do not need to pay any value added tax.
If you are selling your company in an asset deal, the buyer gets its business operations and the assets associated with it but none of shares. An asset deal may include the machinery, equipment, inventories, customers, premises, personnel and the name of your company.
The buyer often establishes a new company for the business operations. The financial and legal liabilities of your company or its risks are not transferred to the buyer.
In an asset deal, your company is the seller and it must also pay the capital gains taxes.
If you collect the capital gains from your company, you must usually pay the capital gains tax personally. In other words, in an asset deal you may have to pay capital gains taxes twice. Paying value added tax on an asset deal is on a case-by-case basis.
After you have sold your business operations, you can close down your old company, in which case you can transfer its assets to you own use. Note that the closure may also lead to tax consequences to you personally and your company.
Be prepared that finding a buyer for your company may be quite labour-intensive and time-consuming.
Start the search for a buyer from your company’s own employees, customers, competitors and other stakeholders and your relatives. Think about who would be interested in your company and why. For example, your competitor may want to buy your company to gain market leadership. On the other hand, one of your employees may be interested in buying your company to start their own career as an entrepreneur.
Prepare a sales advert for your company and publish it in newspapers and online channels. You can also try selling the company by submitting a notification on the Yrityspörssi Business ExchangeOpens in a new window.. There are numerous companies in Finland that may buy even badly indebted companies.
Be prepared to present your company to up to a couple dozen of potential buyers. Usually, only a few of them will go all the way to negotiations. Prepare a comprehensive presentation package of your company for potential buyers.
When searching for a buyer, take advantage of resources such as business brokers, you regional business development company, the Finnish Enterprise Agency and Economic Development Centres. Through these registers and networks, you can find the right buyer for your company.
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You should plan carefully your strategy for the sales negotiations. You should divide the negotiations into smaller parts in which you discuss one issue at a time.
Remember to prepare thoroughly for each negotiating session. The buyer may present a broad range of different views and proposals. Take notes during each discussion with the buyer. Keep all correspondence connected with the sales process.
Conclude a confidentiality agreement at the earliest possible stage. It might be a good idea to conclude a letter of intent when you feel that the negotiations have got off to a good start. In the letter of intent, it may for example be stated that neither of the parties will start negotiations with anybody else during a specific period.
If the negotiations are making good progress, you might decide to conclude a preliminary agreement. It should be seriously considered, especially if you have already agreed on the sale but have not yet specified all the details. You and the buyer should only conclude the final sales agreement when you agree on all issues.
Ask professionals, such as legal experts, to check and finalise the wording of the agreements.