A guide to taking over a company

1. Create a buying profile

Before you start looking, make a buying profile. This is an overview of what you are looking for in a business. Maybe you want to work in a certain industry, because you already have experience here. And do you want to take over a small or large business? Also, think about things like atmosphere within a company (corporate culture), position in the market, or opportunities to grow the business. With a buying profile, you have a list of what you are looking for. And it can improve your position in negotiations. After all, you know what you do and do not want.

2. Find a business

You can find businesses for acquisition through databases, industry organisations and acquisition specialists. An acquisition advisor can help you get in touch with the seller.

There are 3 different ways to acquire a business. If you are taking over a business where you have not worked before, this is called a Management Buy In (MBI).

Perhaps your employer is looking for a new owner for their business. You can then buy out the owner. This is also called Management Buy Out (MBO). An advantage of this is that you already know the business well.

Taking over a family business

A third option is a takeover within the family. For example, taking over your parents' business. A disadvantage of this may be that emotions come into play more quickly because of the personal connection. So, make clear agreements so that your relationship remains undamaged after the takeover. And make sure you pay the right price for the takeover. If you take over the family business for too low an amount, the Netherlands Tax Administration may see this as a gift, a donation (in Dutch). A tax advisor can help you with this.

3. Ask for the sales memorandum

If you have found an interesting business, you need to find out how it is doing. What is the turnover and how much profit does the business make? What are the costs and how many customers and suppliers will you have to deal with? If the owner rents a business premises, you can often have the contract put in your name.

This information is usually contained in a memorandum of sale. This is a document with all the details about the business. With the memorandum, you know what you will get for your money. But also pay close attention to things that are not in the document, such as financial risks, or municipality plans around the location of the business. Also look carefully at what the sales memorandum says about staff. Is there any information missing? If so, ask for it. Also have the memorandum read by an acquisition advisor.

You usually only get such a sales memorandum when there is serious interest. Often, the seller will also want you to sign a non-disclosure agreement (NDA). This way, the owner can be sure that you will not disclose any information about the business.

4. Make good agreements

Agreements that you make during the negotiations can be laid down in a declaration of intent. This shows that you are serious about the takeover. It is not an officially binding contract and you can still withdraw. A declaration of intent includes things like a schedule for the negotiations, length of the confidentiality obligation or other conditions. Ask a consultant or lawyer to help write the statement.

5. Due diligence

Before the sale becomes final, conduct due diligence. This is the obligation of the buyer to check whether the seller's information is correct and complete. In any case, you check the company's figures and contracts. But also pay attention, for example, to whether there is a lawsuit against the business.

If you take over a business, you also take over the employees. See what you can find out about that. How many people are employed and how many hours do they work? Are there any staff members on long-term sick leave? Do you discover risks during your due diligence? Then find out what the takeover implications are and renegotiate.

6. Assess the asking price

The seller has probably determined the value of the business and come up with an asking price. Assess whether you think this is a reasonable asking price and consult with an acquisition adviser.

Expectations

You know the business's situation and figures at the moment. Also estimate the situation of the business after the takeover. Do you plan to make adjustments that will increase turnover? Or, are you at risk of losing customers? The previous owner has built relationships with customers and suppliers, but will they also want to do business with you?

Goodwill

When taking over a business, you have to deal with goodwill. This is an amount for the added value of a company's invisible assets. Think of the company's good reputation, loyal customers or good business contacts. Goodwill is difficult to calculate. So consider what you are willing to pay for this added value.

7. Arrange your financing

Are you unable to pay the asking price (in full) yourself? Then you need financing from, for example, a bank or investor.

List what you need in a financing budget. You can use this to look for financing. From a private investor, such as a business angel or an acquaintance. Or take out a loan from the bank, a microcredit, or set up a crowdfunding campaign. You can also combine the different ways of financing. This is called a financing mix (stapelfinanciering).

8. Ensure a good transfer

Are you in agreement? Then it is time to draw up a takeover contract with the seller and the transfer can begin. Such a takeover contract includes things like the price, obligations, guarantees and what happens to the company's assets. Consult a legal advisor.

Agree how you will inform the business's customers, partners and suppliers of the takeover. Perhaps the previous owner will want to help you onboard. This can help with a smooth start after the takeover. The former owner can introduce you to his network. And if you have any questions, you can ask the person who knows the most about the business right away.

9. Change the Chamber of Commerce registration

Take into account changing the registration of the business with the KVK. Via 'Taking over or continuing a business', indicate the changes and make an appointment. Together with the current owner, you fill in the necessary forms. You visit the KVK with these forms to finalise the takeover.