Owner buyout
How does an owner buyout work?
You sell your company to a holding company, in which you participate (albeit with a minority stake) alongside professional investors.
In addition to a healthy portion of your own funds, supplemented by a vendor loan, the bank finances an average of 50 to 60% over a period of 5 to 6 years.
Thanks to the leverage effect, you enjoy an above-average return on your own capital contribution, but you already set aside more than 70% of your company's value.
This gives you the opportunity to realize a significant part of the value of your company (privately) well before retirement age.
In the meantime, you can continue to do business and enjoy future value creation.
(Smart) investors offer (growth) capital and added value
In addition to facilitating the sale, you can expect input regarding business strategy, a sounding board function, the provision of a valuable network, and/or assistance with further growth or add-on acquisitions. Compared to traditional private equity funds, this type of investor applies less aggressive leverage. As a result, growth expectations are often much more realistic. The proverbial “mother-in-law” looking over your shoulder is less “threatening” in this way. This is not an insignificant emotional factor for entrepreneurs who are often used to being in control. After all, more and more successful (former) entrepreneurs and wealthy families are being persuaded to invest part of their assets directly in SMEs, attracted by above-average returns. They often want to have more impact than with a regular investment on the stock market.
Thanks to DaVinci's many years of presence in the M&A acquisition market, we provide a (pre)selection of investment parties that are the best fit. Our objective perspective and market knowledge ensure a smoother, more efficient, and discreet acquisition process without conflicts of interest.
Continuity & family succession planning
As the owner, however, you do not close the door behind you, but remain operational for another 5 to 6 years. This is also ideal in terms of continuity for employees, customers, and suppliers. In this way, the business transfer can take place gradually. If necessary, the existing management and/or your children who work in the business can already participate in the OBO. This allows the transfer to take place in phases and makes it feasible for all parties. In this way, they start thinking like owners, and no longer just as employees. If, after a few years, it appears that your children who work in the business are ready to run the company on their own, they can buy back more shares from the investors. You then still keep the door open for a family succession, albeit in phases and in a well-considered manner.
What are the main advantages of an owner buyout?
- A significant portion of the company's value, approximately 70%, is now already being realized (privately) and received (no longer subject to business risk);
- Discreet sales process: you do not need to approach competitors or related companies in the sector. This also has the advantage that it does not cause any unrest among staff, etc. Nothing changes for customers, suppliers, and any subcontractors either;
- With a reasonably limited reinvestment, together with the investors, you as an entrepreneur can retain a significant minority stake in your company and thus realize a very attractive added value over a maximum period of six years;
- You can involve any ‘key employees’ or children who work with you in the share capital now or later, which provides them with extra motivation and reward;
- As an entrepreneur, you remain at the helm and take care of the day-to-day operational management, so that the transition takes place gradually and is spread over several years;
- The continuity of the company remains optimally guaranteed, also vis-à-vis staff and employees, so that there is no ‘abrupt’ transition;
- The investors can act as a sounding board and help set the strategic lines, as well as providing an additional network. This means you are not alone in the next growth phase (win-win). The broad network can provide suitable profiles that are actively involved in the company on a daily basis and provide organizational support and advice.
We advise entrepreneurs to sell earlier than initially planned. There is often a strong emotional attachment between the owner and the company. This means that the message does not always resonate. But if you look at it purely objectively and from a distance, this poses a great danger. Your private banker or family officer will (rightly) advise you to spread and diversify your private assets sufficiently. However, your company's shares often take up a very large chunk of your total assets, which in principle entails a major risk. On the stock market, you don't put all your capital into a single share either. An owner buy-out deal allows you to spread your assets sufficiently, bringing more balance to your portfolio while simultaneously boosting your returns.
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