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When a business owner sells their company, they are often negotiating for the first time with counterparties who complete acquisitions on a regular basis.
This difference in experience is far from insignificant and can have a direct impact on the final outcome of the transaction.
In many transactions, negotiations are not limited to the headline price stated in the offer. They also concern, sometimes primarily, the way in which that price is calculated.
This is exactly where a significant share of the value is won or lost.
The headline price does not tell the whole story
When a buyer submits an offer, the seller naturally focuses on the amount proposed.
Yet behind that figure, several technical parameters significantly affect the final price:
- which items are treated as exceptional or recurring;
- which commitments are treated as debt;
- what level of working capital is considered “normal”;
- which assumptions are used to assess future profitability.
These matters are rarely secondary; they may represent amounts equivalent to several valuation points.
Technical matters with very tangible consequences
Consider a company that finances part of its equipment through leasing arrangements.
Depending on how the transaction is structured, these agreements may affect:
- the profitability metric used to value the business;
- the price adjustments applied at closing.
The issue is not to determine which approach is “correct”.
The issue is to understand precisely the financial consequences of each method.
Without this understanding, a seller may accept mechanisms that appear merely technical without fully appreciating their economic impact.
Part of the negotiation takes place after the offer
Many business owners believe that the key issues are settled before a letter of intent is signed.
In practice, some crucial discussions take place later:
- during due diligence;
- during the negotiation of the final transaction documents.
By that stage, the seller is often already deeply engaged in the process, sometimes after several months, and has less scope to challenge certain points.
This is precisely when preparation makes the difference.
Preparation is not about embellishment, but understanding
Preparing a business for sale does not mean presenting it in an artificially favourable light.
It means:
- identifying sensitive issues in advance;
- understanding the mechanisms commonly used in transactions;
- quantifying the economic impact of the available options.
Buyers conduct this exercise systematically.
Sellers therefore have every reason to approach such a transaction with the same level of preparation.
Looking for support?
The sale or transfer of a business is often one of the most important transactions in an owner’s professional life.
Beyond valuation, a successful outcome depends on anticipating the financial, operational and negotiation issues that arise throughout the process.
The Corporate Finance teams at RSM Switzerland regularly advise owners and shareholders of Swiss SMEs on business sales, acquisitions and capital-raising transactions.
By advising on both sides of transactions – sellers and buyers – the teams at RSM Switzerland have a comprehensive understanding of negotiation mechanisms and market practice.
Drawing on their experience in the small and medium-sized business segment, they help clients to:
- secure the key stages of the transaction;
- gain a clearer understanding of the financial and contractual mechanisms;
- protect value throughout the process.
