Buying or selling a company is a significant decision related to the life cycle of a company and an entrepreneur, and at the same time often the single most important event in the entire life cycle of the company. A prerequisite for a successful acquisition is that the acquisition is handled expertly as a whole, considering different perspectives.
ACTIONS PRECEDING THE BUSINESS TRANSACTION
It is very common that a business is not ready to be bought or sold as it is. It is recommendable for the owner of a functioning company to think about how the company can be sold well in advance. A business purchase or sale can come up very unexpectedly, in which case it is usually necessary to proceed quickly. If the structure of the company slows down the progress in the acquisition, in the worst case, the opportunity may pass.
The acquisition may be prolonged or slowed down, for example, because the target company has a lot of accumulated profits or assets (e.g. investments) that do not directly serve the company's core business, and which the buyer is not interested in buying. The buyer is rarely ready to obtain financing to buy profits included in the company's balance sheet or assets that are unnecessary for running the business.
The company structure should be planned in such a way that it can be sold as easily as possible. Company and tax legislation offer many ways in which, if necessary, the company can be adjusted to market conditions in a way that the benefits obtained from the arrangements exceed their costs. Furthermore, it is good to note that the company structure also has a significant impact on how the company owner is taxed on the transaction.
COMPANY VALUATION AND ANALYSIS
It is important for both the seller and the buyer that the valuation of the company is performed correctly. The valuation works as a support for negotiations between the buyer and the seller and helps in evaluating the possible tax consequences of the acquisition. Read more about company valuation.
An essential part of a corporate transaction is a careful analysis of the object of the transaction, the scope of which is determined based on an individual assessment. The term Due Diligence is used to analyse the object of the transaction. In a Due Diligence inspection, independent experts, usually experienced authorized public accountants, inspect the object of the transaction and give a statement on their findings. The result of the Due Diligence inspection can contribute to the final determination of the purchase price of the transaction.
IMPLEMENTATION OF ACQUISITIONS
It is possible to change the ownership of a company in several different ways. The most typical means are the sale of the company's shares, where the target company changes owners, or the sale of the business, where the ownership of the target company does not change, but the target company sells its business and its assets and liabilities to the buyer. The change of ownership can also be implemented through certain restructures.
The way the transaction is carried out has a considerable effect on both the buyer and the seller. The method of implementation affects, among other things, the post-trade responsibilities of the buyer and the seller and the tax consequences of the trade. Therefore, it is important that in each individual case an option is chosen that best serves the needs of both the buyer and the seller.
If you are planning to buy or sell a company, we recommend using the help of experts and partners to find a buyer or seller, plan the sale, organize financing, and execute the sale.
Fiscales Oy is a member of Suomen Yritysvälittäjäin ja Omistajanvaihdosasiantuntijain Liitto ry.
