Transfers: different types for companies

Many business transfers (sales) take place every year. There are four types of takeovers: transfer to family, transfer to third parties, merger with third parties, closing of company. These forms include specific transfers such as management buy-in and management buy-out. Selling, taking over, continuing or transferring a company is not easy and involves many emotions.

Different forms of transfer

When transferring a business, it is important for the entrepreneur to know who he is selling it to. It is his company and he has an emotional bond with it. That is why many entrepreneurs sell their company for a lower price, but to someone well-known. A well-known person could be family or management. The different forms of transfer

  • Family transfer
  • Third party transfer
  • Merging with third parties
  • Close company

Transmission within the family

The growth and survival of SMEs depend largely on how wisely management and ownership are transferred. It is possible for both management and ownership to remain in the family. More than 90% of entrepreneurs would prefer to transfer the business to the next generation of the family. Research by KVK has shown that more than 75% of companies continue. About 40% of all companies continue with someone from the family as director and owner. A transfer within the family is more complicated than a transfer to an external party. The complexity is due to the family relationship that exists between buyer and seller. Emotions in particular influence the business transfer. For many entrepreneurs, a transfer to someone outside the family is out of the question. The possibility of transferring the business to someone outside the family is not an option, because the (family) business has more value than the sales price. Sometimes it is not possible to transfer the business to someone within the family. This can be due to various causes:

  • Company viability
  • Need old generation
  • Willingness and ability of the new generation to comply
  • Opportunity for the new generation to develop

In approximately 10 percent of transfers, management of the company is transferred to someone outside the family, but ownership remains in the family. The property is then seen as a good investment. The transferor has a lot of knowledge of the market in which the company is active and has more influence as a shareholder than if he invests his money on the stock exchange. Two types of intra-family transfers are possible.

  • Family ownership and management
  • Family ownership, third party management

 

Transfer to third parties

Management buyout (MBO)

When the business transfer is found among the employees of the own company, it is a management buyout. About 20% of business transfers take place via an MBO. This is often a small company, fewer than 50 employees. With an MBO, one of the employees, a manager or manager, takes over the company. Transfers in the form of MBO also often occur when a business unit is divested.

Management buy-in (MBI)

If the majority of the transfer takes place to a third party, this is an MBI. In such situations, management is reinforced with people from outside. They often get a share in the ownership. So people are attracted from outside and they then take over part of the ownership. An MBI is often used when there appear to be no other options.

Investors Buy-In

With investor buy-in, the emphasis is not on attracting management, but on attracting capital. This can be done in two ways, debt capital or equity. Foreign capital can be raised through loans. Equity can be raised by issuing shares. The investor will want to exert some degree of influence on the company’s decisions. This is possible through a place in the management or supervisory board of the company.

Takeover

Ownership and management are completely taken over by third parties. This can consist of 1 or more people, but can also be a company or competitor.

Merging with third parties

This looks like a takeover within the family and third parties combined. Merging with third parties takes the form of a legal merger. The 2 parties that merge are approximately of comparable size. The management is composed of the management of both companies.

Close company

About 75% of the companies are continued. This means that 25% will not be continued, but will be closed. All activities are stopped and the business premises are sold.