When selling your company internationally, a number of careful considerations must be made. One of the things you need to consider is whether you wish to sell your company to a national (Dutch) or international party. What is involved in selling a company to an international party? What are the advantages and how does the international network of a corporate finance office support this process? In this article we outline an example of selling your company to a party in the United States.
What is involved in the international sale of your business?
Compared to a sale in the home market, an international sale involves additional complexity. There are a multitude of factors that can have a significant impact on the sales process in a cross-border context. Things to pay attention to include, among others, local business customs and laws and regulations.
For example, in the United States there are different customs and procedures surrounding the due diligence process (book review). Also, the acquisition process will, most likely, take longer. International parties, who have no experience with the acquisition of a Dutch party, need more time to go through the process.
Reasons to sell your business to an international partner
The main reasons for an entrepreneur to sell his/her company to an international party is the possibility of realizing a higher sales price. There is growing demand from the United States for quality Dutch companies. This puts you as an entrepreneur in a favorable negotiating position.
It may also be the case that you are not (yet) willing to sell the 100% of the shares. In this case there is the possibility to sell a part of your company to a foreign buyer. This can be an interesting step to accelerate the internationalization of your company. By using the international network of a financial sponsor (see also: private equity party) you can expand your business into foreign markets. In the long term, you may choose to sell your company completely internationally.
Higher multiples in the international takeover market
For many entrepreneurs, the generally higher price paid in the international takeover market is a major incentive. With significant interest, such a sale yields between approximately 20% and 50% more than a sale to a Dutch partner. Keep in mind that these higher prices are highly dependent on factors such as: stage of life of the company, size of the company and growth opportunities.
Moreover, there is a clear difference between the multiples realized in different sectors. In fast growing sectors with a lot of potential, higher multiples are generally paid than in mature sectors with less strong, but stable growth. For example, the average EV-to-EBITDA (transaction) multiple in the fast-growing software sector is 11.9 in the Netherlands versus 16.7 in the United States. Multiples in other industries, such as the food industry, are closer together. Here the respective EV-to-EBITDA (transaction) multiple is 9.2 for the Netherlands and 11.0 for the United States (source: Valutico).
How can the international network of a corporate finance firm provide support?
If you are considering an international sale, it is important to have a clear picture of the international acquisition landscape. You should be familiar with the opportunities and risks involved. Moreover, a structured inventory of suitable foreign parties and an international network are valuable assets in the sales process.
For example, Florijnz is affiliated with two international organizations. First, with Cornerstone International Alliance, a renowned international network of 26 M&A firms. Cornerstone's members are spread across the United Kingdom, the United States and India. They assist its clients with the sale, acquisition or valuation of various companies. Cornerstone's network focuses on companies in the middle and small segment, with an EBIDTA of $500k to $10 million or a turnover of $5 to $150 million.
In addition, Florijnz is part of Dealsuite a, mainly European, network of M&A consultancies. Through such a network a selling company can get access to a wide range of strategic or financial buyers outside the national market. Outside of an extensive network, Florijnz can also offer advice regarding the selection of potential parties that best fit the needs of the entrepreneur.
An M&A process is in itself a complex procedure. However, selling your company internationally adds to the complexity and uncertainty. Support from a corporate finance firm therefore plays an important role in easing the international sales process.