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Sale of a company in the e-commerce segment
The sale of a company is often associated with the sale of a medium-sized enterprise after decades of work, a dignified fleet of vehicles and grey beards. However, company building can also happen quickly and the founders’ beards are far from turning grey over it.
A whole range of digital business models seem to be suitable for this. Among other things, due to low entry barriers – digital assets – are not expensive and the fundamental possibility to reach customers even without an established sales structure.
However, the low barriers to market entry lead to a high level of competition, and reaching target groups relevant to one’s own business model can be very time-consuming.
Moreover, the long development towards a successful digital business model is regularly not seen, because this often takes place before the founding of the then successful company, sometimes brings 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 had come together who had previously run two companies independently of each other. Sustainable, as they like to say today, but without the big success that is announced in transaction reports.
Two of the founders had founded a company for printing (personalisation) and distribution of consumer goods in the smartphone sector in their student days, but were not entirely happy with it in the long term due to constantly changing smartphone models and the need to keep 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 had acquired a property outside the big city that could still provide space for a growing company even after several years.
The three had met in the course of a project and quickly saw the advantages that could be offered by combining online marketing expertise, the personalisation of more 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 the personalised products being distributed via its own as well as third-party marketplaces.
So quickly that certain thresholds have been exceeded in terms of turnover and profit, which could potentially make the company interesting as an acquisition for both private equity companies and strategic buyers.
You yourself have led a company to a certain stage of maturity and would like to assess which transaction opportunities are open to you.
For this reason, in the first phase of an M&A project, the client may sometimes have the impression that he has already been caught up in due diligence. But only the processing of extensive, proprietary information allows the most essential to be distilled. And it is this simplicity that makes a more complex project accessible to a broad range of investors.
The in-depth discussions that need to be held with a number of potential buyers in a case like this requires, incl. The preparation and follow-up work and the involvement of the management naturally take time. Likewise, to analyse the various offers for advantages and disadvantages.
Financial investors and strategists incentivise the retention of existing shareholders, which is often assumed, at least for some time, differently. And these future remuneration components are not always comparable 1:1. Particularly in models in which the existing shareholders are to share in future opportunities, the question quickly arises as to how high the probability is that these opportunities will materialise. Which, to be honest, no one can answer. And so assessability plays a big role in terms of the proposed incentive model, as well as in terms of the buyer to whom one commits.
The desire to be able to assess the other party is naturally shared by both sides, so that in an earlier phase of the transaction the potential buyer likes to visit the company to be bought, and vice versa in a subsequent phase. Of course, the overall view decides with which party one signs the preliminary agreement (LOI), which is often momentous at least in the form that it prohibits the company from pursuing the transaction process in parallel with other parties as well.
Depending on the preparatory work, the due diligence process may have its surprises in store, which is why transparency can only be advised in advance. You don’t have to reveal all your trade secrets to give buyers an early heads-up on what you’re critical of yourself.
In this case, the company sale project was completed with a buyer whose corporate structure suggests a number of synergies and whose future direction attaches a core role to the acquired company.
in rebus corporate finance – without providing tax and legal advice – prepared all transaction-relevant documents in cooperation with the founders, identified the buyer and advised the founders throughout the entire process at every stage.