Unternehmensverkauf - Unternehmenswert festlegen

Selling your business - How to increase the value of your business! Part 1

One of the crite­ria why a compa­ny sale fails is an exagge­ra­ted asking price on the seller’s side. The buyer’s and seller’s ideas about the value of the compa­ny there­fo­re differ great­ly.

The cause is rarely an incor­rect compa­ny valua­ti­on. Rather, the emotio­nal value of the compa­ny is percei­ved by the owner to be so high that he classi­fies it as equal­ly high in moneta­ry terms. The buyer side, however, usual­ly looks at a compa­ny in a comple­te­ly diffe­rent way. Perhaps you would say more ratio­nal­ly. However, emotio­nal factors also play a major role on the buyer’s side. In most cases, it is a matter of a prono­un­ced need for securi­ty. There­fo­re, in princi­ple, a prospec­ti­ve buyer only wants to know one thing: How sustain­ab­ly can the compa­ny create added value for its target group?

Basics webinar presen­ted by Nils Koerber


Compa­ny sale (M&A) without risk and loss of value

Only if you can make a prospec­ti­ve buyer belie­ve that the answer to this questi­on will also succeed positively in the future, will he assume that the compa­ny will also genera­te a return in the future. This is important, e.g. for the repay­ment of finan­cing. A close look at the past is not enough to make a state­ment about the sustaina­bi­li­ty of the econo­mic power. Classics of failure, such as Nokia, Polaroid, etc., show that sticking to the known and maste­red techno­lo­gy, to the existing business model, does not neces­s­a­ri­ly guaran­tee a profi­ta­ble future value propo­si­ti­on for a future target group.

Sale of the compa­ny through change of the business model 

The influence that a change in the business model can have on the purcha­se price and succes­si­on is shown by the case of a pure contract manufac­tu­rer of turned and milled parts. He wants to sell his compa­ny becau­se he does not want to conti­nue with the entre­pre­neu­ri­al respon­si­bi­li­ty. The order situa­ti­on is good, as he is known for his quali­ty, punctua­li­ty and know-how. There are many prospec­ti­ve buyers, but most of the purcha­se price offers do not meet the seller’s expec­ta­ti­ons. This is usual­ly justi­fied with the lack of scala­bi­li­ty or a missing unique selling proposition.

Our questi­on to the seller about what he would do differ­ent­ly in his business model led to the follo­wing state­ments: offer design know-how as well and expand produc­tion to compo­nent groups in order to increase the depth of added value. Concre­te ideas were available, but the seller could not and did not want to imple­ment them himself.

The inclu­si­on and discus­sion of these ideas right from the start of the discus­sions and selec­tion of poten­ti­al buyers soon revea­led the ideal buyer, who recog­nis­ed and appre­cia­ted the potential.

The business model of a company 

Whenever we speak of added value for a target group, it is the company’s business model that descri­bes this context. At the heart of it, it is prima­ri­ly about the value propo­si­ti­on. With which products or which service do you create added value? For whom? For your custo­mers or those who are to become custo­mers? Then we are talking about your target group or custo­mer segments. The decisi­ve factor here is the relati­onship you have with your custo­mers and the channels through which you reach them.

The right-hand side in the so-called Business Model Canvas (canvas means canvas, wallpa­per) is respon­si­ble for the turno­ver in the company.

Illus­tra­ti­on: Business Model Canvas 

On the left-hand side, list the key activi­ties, resour­ces and partners to deliver your value propo­si­ti­on. This descri­bes the cost side of your business model.

The valua­ti­on of a business model

If one looks at the tradi­tio­nal, past-orien­ted valua­ti­on methods of compa­nies, one finds that the view into the future is only taken into account to a very limit­ed extent. In additi­on to the net asset value method (valua­ti­on of the current compon­ents of the fixed assets) and the multi­pli­er method (multi­pli­ca­ti­on of the EBIT by a multi­pli­er typical for the indus­try), compa­ny values in the DACH region are prima­ri­ly valued using the capita­li­sed earnings value method and in the inter­na­tio­nal context predo­mi­nant­ly using the discoun­ted cash flow method. Here the last three annual finan­cial state­ments are formed as an adjus­ted avera­ge balan­ce sheet and then the cash flow or EBIT is discoun­ted over the future ten years with a capita­li­sa­ti­on interest rate. In simple terms, it attempts to deter­mi­ne the proba­bi­li­ty that today’s earnings will still be genera­ted in future years. In the Canvas model, the left-hand side is subtrac­ted from the right-hand side and then discoun­ted with a risk interest rate. This is becau­se there are in fact no empiri­cal values available as to how the future will turn out. The same appli­es to the develo­p­ment of turnover.

You alrea­dy reali­se that looking into the future is looking into the past and extra­po­la­ting into the future. It has more to do with looking into a crystal ball and the princi­ple of hope that the prospec­ti­ve buyer may not take this aspect quite so seriously.

Valua­ti­on methods for the sale of a company 

Future-orien­ted valua­ti­on methods try to give a more quali­ta­ti­ve touch to looking into the crystal ball. We should there­fo­re not expect a moneta­ry compa­ny value from opera­tio­nal planning methods, data-based methods or bench­mark methods. They are more ratings about the indivi­du­al factors of the business model (see the Canvas approach) and its sustainable develo­p­ment forecast. In doing so, we would like to IDEASCANNER which, accor­ding to custo­mer feedback, is ‘a real eye opener’ and ‘better than anything else on the market’, becau­se a Business Model Canvas does not tell you where you should impro­ve your business model. 

Authors:

Wolfgang Bürger, KERN locati­ons Nurem­berg and Würzburg
Roland Grepp­mair, KERN Munich locati­on
Holger Haber­mann, KERN locati­ons Munich and Salzburg
Andre­as Stütz, IDEASCANNER, Founder & CEO

TIPS for further reading: 

MBI - Success model for corpo­ra­te succession

Corona, Compa­ny Sale & Now? Part 1

The Coope­ra­ti­ve Model - When Employees Follow in the Foots­teps of the Company’s Founders Part 1

Earn-out clauses in the sale of a compa­ny