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Sale of a company in the e-commerce segment
Company sales are often associated with the sale of a medium-sized company after decades of development work, a solid fleet of vehicles and gray beards. However, companies can also be built up quickly and the founders’ beards far from gray.
A whole range of digital business models appear to be suitable for this. This is partly due to low entry barriers – digital assets are not expensive – and the fundamental possibility of reaching customers even without an established sales structure.
However, the low barriers to market entry lead to a high level of competition and reaching relevant target groups for your own business model can be very time-consuming.
In addition, the long development towards a successful digital business model is often not visible, because this often takes place before the successful company is founded, sometimes bringing failure with it, but always experience that can be worth its weight in gold when the next company is founded.
In this case, three founders came together who had previously managed two companies independently of each other. Sustainable, as people like to say today, but without the huge success that is announced in transaction reports.
Two of the founders had started a company for the printing (personalization) and distribution of consumer goods in the smartphone sector while still students, but were not completely happy with it in the long term due to constantly changing smartphone models and the need to maintain significant stocks – with the corresponding risk
The third founder had dedicated himself to printing a much more durable consumer product, which in turn was hardly subject to fashion fluctuations, and incidentally acquired a property outside the big city that could still accommodate a growing company even after several years.
The three had met in the course of a project and quickly saw the advantages of combining online marketing expertise, the personalization of durable consumer goods – and a place for entrepreneurial development.
This company grew rapidly within 5 years after merging the assets of the two predecessor companies, with personalized products being sold via its own and third-party marketplaces.
So quickly that certain thresholds were exceeded in terms of turnover and profit, which could potentially make the company an interesting acquisition for both private equity companies and strategic buyers.
You have led a company to a certain stage of maturity and would like to assess which transaction opportunities are open to you.
Such a business model is not yet an artificial intelligence application (although there is a proximity to it in some areas), but it does require explanation. Explaining business models free of buzzwords is always the first task of a consultant in the M&A environment. The second is to illustrate the potential. The first task is conceptual. The second can require a lot of Excel sheets until you have identified the most important success drivers and worked out the connection with business development in such a way that you can move on to simplification.
For this reason, in the first phase of an M&A project, the client may sometimes have the impression that they have already been involved in due diligence. But only the processing of extensive, proprietary information makes it possible to distil the essentials. And it is this simplicity that makes a complex project accessible to a wide range of investors.
Interfacing with buyers
The in-depth discussions that have to be held with a number of potential buyers in such a case, including preparation and follow-up and involving the management, naturally take time. It also takes time to analyze the advantages and disadvantages of the various offers.
Financial investors and strategists incentivize the retention of existing shareholders, which is often assumed, at least for some time, in different ways. And these future remuneration components are not always 1:1 comparable. Particularly in models in which the existing shareholders are to participate in future opportunities, the question quickly arises as to how high the probability is that these opportunities will materialize. To be honest, no one can answer that. And so predictability plays a major role with regard to the proposed incentive model, as well as with regard to the buyer to whom you are committing yourself.
Both parties naturally want to be able to assess the other party, so that the potential buyer is happy to visit the company to be purchased in an earlier phase of the transaction and vice versa in a subsequent phase. Of course, the overall view determines with which party the preliminary agreement (LOI) is signed, which often has serious consequences, not least in the sense that it prohibits the company from pursuing the transaction process with other parties in parallel.
Final steps and outcome
Depending on the preparatory work, the due diligence process can have its surprises in store, which is why transparency is always advisable. You don’t have to reveal all your business secrets in order to give the buyer an early indication of what you yourself see as critical.
In this case, the company sale project was concluded with a buyer whose corporate structure suggests a number of synergies and whose future orientation places the acquired company in a core role.
in rebus corporate finance prepared all transaction-relevant documents in cooperation with the founders, identified the buyer and advised the founders on every step of the process – without providing tax or legal advice.