Company takeovers: different situations

Management buy-in (MBI)

Taking over a company that you have never worked for is called a Management Buy-in (MBI). In this case, you start running the company as the new owner. There are various reasons for taking over a company. Are you an experienced manager who wants to give the company a new boost? Is your main interest the future returns under your leadership? Or are you a buyer who wants to safeguard the unique identity of the company?

The seller may have their own reasons, too. They might want to sell the entire company, only part of it, or just a customer portfolio. Maybe there is no successor. Or they might have emotional or financial motives.

The takeover has a better chance of success when your wishes and the seller’s wishes are aligned. Buyer and seller have different perspectives on the takeover process. The interest is the same: a successful takeover. To get an idea of what the seller is dealing with, try looking at it from their perspective.

Management buyout (MBO)

Buying the company where you work as an employee or manager is called a Management Buyout (MBO). You buy out the current owner or you acquire part of the business. If the latter is the case, you continue the business under a new company name. The fact that you know the company, its culture, and its specifics is beneficial to both you and the seller.

As the potential buyer, you talk and negotiate with your current employer. Where normally you had a hierarchic relationship, you now are an equal conversation partner. Be aware that there is always a possibility that the takeover does not happen. What will you do if that happens? There are interesting specific financial constructions for a Management Buyout.

Takeover within the family

You work in the family business and your parents want to take a step back. You are regarded as the obvious successor. Or someone in the family suddenly dies and you are faced with the question of succession.

In many ways taking over the family business is comparable to other takeovers. There are, however, the family ties to consider. These will still be there once the business transfer has been completed. That is precisely why it is wise to start preparing early. If this is possible, of course.

Be open from the start to your family members who are not working in the company. Make agreements about the parent gradually stepping back after the takeover. Have a civil-law notary draw up these agreements in a family charter as well.

Please note: In a family business takeover it is not uncommon for the purchase price to be too low (compared to the actual market value). The Dutch Tax And Customs Administration will consider this a gift (in Dutch). That is why it is smart to contact your accountant well in advance to discuss the best way to organise the takeover, also in terms of taxes.

Gradual takeover

In practice, takeovers do not happen overnight. It is a gradual process that ensures the company’s continuity and gives you the opportunity to familiarise yourself with the ins and outs of the business.

There may also be financial motives for a gradual takeover. For instance, because at this stage you cannot get all the funding yet. Or you have stipulated in the agreement that you can pay the purchase price in instalments.

Some schemes also require that you work together for a specific period of time (in Dutch). In this case, the buyer pays a lower purchase price and the seller receives more proceeds.

The importance of a takeover advisor

External advice is essential when you are purchasing a company. Hire a takeover specialist to coordinate the entire purchasing process. You can also bring in a legal or financial expert. These experts can assist you in your decision-making process. They will also help you avoid unpleasant surprises, such as the settlement of current claims or warranty obligations. That is why we made a list of takeover experts for you.