Corporate transactions are experiencing a very intense moment of activity due to several strategic and financial factors:
Strategic:
- The need/option to reposition the company in markets and technologies
- Corporate growth based on integrating/absorbing companies
- Divestment decisions as a way to obtain financial resources
- Entering activities with a better outlook and potential future growth
Financial:
- There is a lot of liquidity in the market, from both financial institutions that fund transactions and financial investors that provide debt and capital
- The pandemic has led to the emergence of reasonably priced opportunities for buyers A crisis for some can be an opportunity for others
- Financing costs are very manageable
- The search for profitability by financial investors has led to a large number of venture capital funds growing and being on the lookout for investments in all company segments and in various investment formulas.
Despite the uncertainty in the market, corporate transactions are once again part of the growth and diversification strategy of large companies and financial investors seeking profitability.
The pandemic, and especially its aftereffects, are making company owners reflect on whether to continue to own and manage their companies and how to tackle future challenges with assurance and energy.
This internal reflection involves both economic and emotional aspects.
From the emotional viewpoint, it is not uncommon to consider selling a company as the last resort rather than a good option.
In family companies, the emotional part is characterised by a stronger attachment and the decision to sell can be seen as breaking away from the family or a betrayal of the wishes or intentions of the founder.
However, the economic reality and survival of businesses do not depend on feelings, but on having clear goals and the capability, energy and resources required to achieve them.
The pandemic has revealed weaknesses such as:
- Small size
- Excessive leverage which, coupled with a fall in income, has led to more financial stress. Fortunately, this have been mitigated by loans from the Official Credit Institute (ICO, in Spanish) which, by the way, will have to be repaid. This means that if income and profitability do not recover, the issues will resurface.
- The difficulty of redirecting company strategies in response to the rapid changes taking place and obtaining the resources required to do this.
Another consequence of the pandemic and the uncertainty we are experiencing is burnout among businesspeople, which is the opposite of the great demands and motivation required to deal with the new challenges. This situation will most likely affect the competitiveness of the companies and their ability to adapt to the new, more globalised and changing environment.
What should they do in these circumstances?
When circumstances such as these arise (burnout, lack of motivation, lack of resources to face new challenges, etc.), selling the company is the right decision.
Another essential aspect of the decision to sell is identifying the right moment to do this.
In our experience, the right moment is when the company still retains its value and is not yet in decline.
The decision to sell is often made when the company is going through a hard time and at this point its value will have fallen.
The decision to sell a company must be properly thought out and planned, as the successful conclusion of the process and receiving the highest possible value hinges on this. The importance of the decision goes beyond the owners and also affects the employees, customers, suppliers, etc. It therefore cannot be made on the spur of the moment.
Being aware of one’s own limitations and deciding to transfer the asset to a third party is an act of realism and honesty.
That is why the decision to sell the company that you have created must not be seen as failure, but as a good alternative to make sure that the company lives on and grows, creating employment and wealth through the work of the new owners. This is a reason for personal pride and is a sign of corporate success.