How To Prepare A Tech Business For Sale And Succeed

How To Prepare A Tech Business For Sale And Succeed

The transfer of a tech business is a relatively important step that must be properly prepared before the start of the transmission to optimize its smooth running.

Properly preparing a tech business transfer involves carrying out the following steps: a prior reflection on the subject of the sale, carrying out a diagnosis of the company, evaluating its sale price, studying the tax system relating to the sale, the establishment of recent accounting statements, the preparation of the communication on the sale and the anticipation of negotiations with the buyer.

Reflection prior to the sale of the information technology business

When the hypothesis of the sale of your tech business is considered, you must start by asking the right questions upstream of the transaction.

  • Why do you want to transfer your business? What do you want to do after you sell the business?
  • How quickly do you want to sell your business?
  • How would you like to organize your outing? Is a transition with the buyer possible?
  • How do you want to transfer the business ( sale of business assets, sale of company shares, sale of shares, etc.)? Would you like to remain associated?
  • Did you find out about the tax measures from which you will be able to benefit from the transfer operation (exemption for retirement, allowance for the duration of holding securities, etc.)?
  • How do you want to communicate about the sale of the business? How do you plan to find buyers? What type of buyer are you targeting (a relative, an employee, a competitor, etc.)?
  • Do you have any idea how much your business is worth and how much it will cost to sell?

Carrying out a diagnosis to prepare for the sale of the company

Before officially putting your business up for sale, it is advisable to establish a complete diagnosis of the business situation. This inventory concerns all areas of the company (the production part, the commercial part, the administrative part, the tax part, the HR part, etc.).

The objective is to present to the buyer the state of the company in full transparency because a potential buyer will perform a full or partial audit on the situation of the company. We will insist here on 6 important elements. Then, depending on your business, anything else of significant importance should be presented.

Establishing a written diagnosis is of interest to buyers potentially interested in the business. Given the consistency of the file, a confidentiality agreement must be signed before handing over the document to them.

Evaluating the sale price of your business

To properly prepare your business for sale, it is necessary to carry out an evaluation of its sale price. There are many assessment methods available, you should select a few that are relevant to your case. To go further, we advise you to read this file: the valuation of the company.

Here are some commonly used assessment methods:

The evaluations in relation to the annual turnover. Depending on your activity, we can use a sectoral percentage that we apply to the annual turnover excluding taxes or VAT. This percentage is generally established statistically, by relating the sale price of a panel of similar companies that have been sold to their turnover.

Profitability-based valuations, which involve estimating the value of a business based on the profitability it generates. These techniques are complex and they are based on forecasts (discounting of future cash flows).

Evaluations based on precise indicators, possible for certain activities. These evaluations consist of calculating the value of the company by multiplying a key data item of the activity by a determined amount. For example, a web media publisher can be valued in relation to the number of page views, a production company in relation to the quantity produced, etc.

Market-based valuations, which consist of determining a valuation based on the sale price of several companies of the same activity currently for sale. The objective is to offer a price consistent with the current state of the market.

Communication about the sale of your business

The communication on the sale of your business concerns both internal communication (with employees) about the assignment and outdoor advertising to find the future buyer of the company.

In all cases, employees must be informed in advance of the proposed sale, this is a compulsory right of information. For more information on this subject: the right to prior information to employees in the event of a transfer.

Communication with employees must be carefully considered, you must inform them quickly once your decision is made, and then keep them informed of the processes in progress. An opportunity is even possible because it is not uncommon for one or more employees of the company to acquire the company.

External communication on the disposal project is used to find potential buyers. Several more or less confidential strategies are possible: in particular, you can discuss it with competitors who are potentially interested in buying you, disseminate information within your professional network, reconnect with people who have expressed their interest in the past, spontaneously contact people or companies who may be interested, or mandate a transmission professional to find you a buyer.

Prepare and anticipate negotiations on the sale of your tech company

To succeed in your business transfer, you have to anticipate the negotiations that will take place with the interested buyer. Thus, the answers to the main questions that you may be asked must be worked on.

The conduct of the diagnosis that we have mentioned above must provide you with arguments to justify the transfer price you are asking for. If it is established in full transparency, the performance of the acquisition audit by the buyer will not normally raise significant issues that could negatively impact the negotiations.