Company takeovers: the five most important success factors

The key to professional success doesn't always involve starting your own business. You can also take over an existing company as a way to become professionally independent and successful. Taking over a company offers several advantages compared to starting a new one: An existing company can leverage the expertise of experienced employees who are already familiar with the relevant product or service and processes. Established companies also have a customer base and resources that they can continue to draw on. There is already a corporate culture in place that doesn't need to be built up from scratch. 

However, this culture can represent a challenge for new managers who step directly into a major leadership role on arrival. It's important not to completely overturn old processes but to still manage to bring about the changes that a takeover entails. There are various conditions to be met for a takeover to ultimately be considered a success.

After the initial discussions, the seller submits a document called an information memorandum. This shows the company in the best possible light, analyzes the market and the competition, and reveals the company's future potential. In other words, it contains detailed information to convince the prospective buyer to purchase the company. On the basis of the information memorandum and the seller's asking price, potential buyers should be able to make up their minds rapidly whether they have any real interest in the company.

If they decide to go ahead with the purchase, the next stage is due diligence (company audit). This is the most complex and lengthy phase of the purchasing process, but also ensures maximum transparency and minimizes the purchasing risk for buyers.

During due diligence, all the economic, tax, financial and legal aspects of a company are examined in detail. This gives potential buyers all the information they need about company profits and structures – as well as possible debts or gray areas.

If both parties agree with the outcome of the due diligence and the resulting company valuation, the purchase can actually take place. The buyers then have to raise the necessary funds to finance the transaction. They generally use a mixture of equity and debt capital.

A bank loan, which can cover between 40% and 60% of the purchase price, is a standard way to obtain debt capital. The buyer should get in touch with their bank's financing experts as soon as possible to obtain comprehensive advice. The bank can help them to put together the financing.

Qualified experts can also give the purchaser a realistic idea of all the risks involved in the takeover. M&A advisors from UBS will not only help with pure financing aspects, but can also assist with the negotiation, valuation and coordination phases of a company takeover.

As well as obtaining a loan, the purchaser can also agree that the seller will continue to participate financially in the business. This means that they will retain a stake in the company after the transaction.

A company takeover usually takes two to three years once the contract has been signed. During this time, the previous owners remain in close contact with the new proprietors. All the responsibilities and processes should be passed on step by step to ensure a well-organized takeover. New structures should be put in place over time rather than implemented overnight.

To ensure that everything runs smoothly, the different parties usually define together at the start of the takeover how the company processes will be handed over and in what timeframe. They also discuss how the former owners can be released from their responsibilities over time. This can be achieved by a gradual handover of operational tasks, followed by the complete departure of the seller or transfer to the Board of Directors at a later date.

During this phase, it is particularly important to merge the old structures with new ideas. All the parties have a role to play and should constantly keep in mind what is best for the workforce and the customers to safeguard the continued existence of the company.

A change in management often creates feelings of uncertainty and concern among employees. This makes it all the more important to communicate regularly and to inform key members of staff about the process as soon as possible. Active, transparent communication helps to reduce uncertainty and foster team spirit between the existing employees and the new management.

However, it is important to choose the timing of internal announcements carefully. Employees in management positions should be involved as early as possible. Before informing the rest of the workforce, it makes sense to wait a few months until a clear strategy for the handover has been agreed on.