Building, falling and getting up again
Entrepreneurship requires perseverance. When you build a business, you invest not only in business, but also personally. Selling your business is a milestone, the result of years of commitment and effort. At this stage, emotions and excitement come together. Preparing for the sale requires attention to detail, while day-to-day business operations continue as usual. Together with your corporate finance adviser, you prepare the company for sale. You build a relationship of trust, which is of great value in the further process.
The sales process: from preparation to closing
The sales process starts with preparing your company for sale. You look at the set-up of the organisation, the legal position towards employees, customers and suppliers, and make sure the administration is in order. Once the process proceeds, you and your adviser prepare an information memorandum. This is shared with carefully selected prospective buyers. After a round of non-binding bids, one candidate stands out. There is a click, the business model is understood and professionalism is apparent.
The corporate finance adviser works with you on a roadmap. A draft letter of intent is also drawn up for you. This contains the basic principles of the sales process. These include exclusivity, due diligence, the virtual data room and the terms of the provisional purchase price. That document is negotiated first and usually goes smoothly. That inspires confidence, but it also means that the process is now gaining momentum.
From the moment a prospective buyer becomes serious, the playing field changes. The buyer often engages a whole team of external advisers, from lawyers and tax specialists to accountants and technical specialists. These advisers are there not only to identify risks, but also to negotiate firmly on terms and price on behalf of the buyer. Their role determines the pace and tone of the process during due diligence.
The due diligence process
The due diligence investigation forms the heart of the next phase. This is the moment when the buyer, together with his advisers, thoroughly vet your company. Legal, fiscal and financial aspects are carefully examined. The virtual data room plays a central role here. This is a secure online environment where you make all relevant documents available and where the buyer's questions can be answered immediately. The pace is fast and the pressure on you and the corporate finance adviser team is increasing. The questionnaires become more and more extensive and the requests for additional information and documentation follow in quick succession. The buyer's advisers are trained to look critically at every detail and leave little to chance. For you and your advisers, this means you have to constantly shift gears and maintain an overview. It is not unusual for communication to go mainly through these external advisers, which sometimes makes it seem that you have little control over the process.
During the investigation, not only figures and contracts are examined, but also the structure of your organisation, agreements with employees, customers and suppliers, and the way the administration is set up. The buyer wants to be sure there are no hidden risks. Sometimes points emerge that require extra attention, such as pending disputes, special agreements or different items in the annual accounts. It is important to be transparent about this and provide additional explanations where necessary.
Together with your corporate finance adviser, you do everything possible to ensure that the buyer is properly, correctly and fully informed and that all questions are answered carefully and on time. This requires commitment and cooperation, but is essential for a successful transaction.
Negotiations
After completion of the due diligence, feedback from the buyer follows. In most cases, the buyer is satisfied, but it still often happens that risks are identified that the buyer believes affect the amount of the purchase price. This can lead to renegotiation, which is often perceived as awkward and uncomfortable. With professional guidance, you look at the buyer's arguments and gather additional information to provide a clear response. This is often followed by a discussion with all advisers and the parties themselves. In it, the buyer will emphasise that the company is after all slightly different from what was thought. Ultimately, you as the seller will also have to set clear boundaries. You will not sell the company at any price. In the end, this usually leads to an agreement that is acceptable to both parties and where you feel that those issues have been definitively agreed upon.
The purchase agreement
The agreement is followed by the negotiation of the purchase agreement. This mainly involves lawyers. You have to deal with concepts such as vendor loan (subordinated loan to the buyer), earn-out (subsequent payment depending on future results), guarantees, indemnities, limitation of liability and a non-competition clause. The buyer expects certainty, you demand clarity and peace of mind. On the day of delivery of the shares, everything comes together at the notary's office. The deed is signed and a glass is raised. This is followed by a period of rest, sometimes still with a temporary involvement in the company.
The new reality after the sale
After closing, the dynamics change. New people take the helm and decision-making feels different. Results may be disappointing after a sale and the atmosphere in the organisation may change. Key employees sometimes leave of their own accord. This increases the likelihood of discussion and uncertainty. Surely you have to get used to your new role. You are no longer in the lead, nor do you always find a listening ear.
Post-takeover dispute: the claim letter and the impact
After a few months, a letter of reproach may follow from the buyer. Important information was allegedly missing during the sales process, such as customer departures, complaints, disputes with suppliers, obsolete stock or outdated systems. The buyer claims that warranties were breached and that significant damage was suffered. This often comes in unexpectedly and harshly. For you, it feels that all allegations are false. Everything was in the data room and all answers had been provided. And a substantial markdown on the purchase price was accepted by you. It feels unwarranted. So is this another attempt at renegotiation?
You need clarity and make sure you are put in touch with an experienced post-acquisition litigation lawyer who is part of a good firm with an ambitious team. This may be how you end up at TK.
Our approach
A personal introduction and first click is important. That is why we like to meet in person and, if possible, with the corporate finance adviser's team. We usually ask to share key documents in advance, so that for the purpose of the discussion we already have a clear picture of the facts and a first impression of the legal and strategic context.
In a post-acquisition dispute, it is essential to map out the entire file. Not only the legal documents, but also all communications, interview reports, notes, versions of documents, the virtual data room and all post-acquisition correspondence. The facts are decisive. With intelligent systems and a keen eye for detail, we create overviews.
Based on the discussion(s) and the complete file, we are transparent about the work required and the associated cost estimate. If necessary or desired, we call in third-party experts. These include former judges, damages experts, but also other entrepreneurs who have faced similar claims.
Together with you and the corporate finance advisor team, we establish and optimise your legal position. The strategy depends on the circumstances and the buyer's motives. Sometimes they are after an extra discount, sometimes a lengthy procedure. The strength lies in clarity, factual argumentation and convincing legal analysis to destabilise the buyer and make him reconsider. Lengthy litigation often outweighs the investment in time and money for an uncertain buyer. If there is room for consultation, we opt for a settlement that is favourable and final. If that fails, we fine-tune the litigation route and set up counterclaims where necessary. Step by step, we work to reject or limit the buyer's alleged claims.
What you can do yourself
A strong position starts early. A complete and clear data room, consistent answers and a clear disclosure process are crucial. Record decisions and relevant events well. Communicate clearly about expectations and performance. Ensure that the letter of intent and purchase agreement set clear limits on liability and that all relevant information is shared. This is not an extra burden, but an investment in post-sale peace of mind.
So that you can move forward
In post-acquisition disputes, we work as a team, together with committed and knowledgeable colleagues. Files are thoroughly analysed, strategies determined and the pace monitored. You have one permanent contact person and a small team that thinks and implements. This way, communication remains clear and you get the right attention. We believe in a personal connection and conveying not only the legal arguments, but also the story behind them.
A post-takeover dispute affects not only numbers, but also people. It takes energy and can put pressure on the joy of doing business. With a down-to-earth view, solid facts and a practical strategy, we restore peace of mind. We stand beside you as an entrepreneur, so that you can get on with your life after the sale. Time for clarity and a concrete approach.
More information.
Do you have any questions or can we help you further. Please contact one of our professionals.
