M&A Netherlands: The promising way to sell a business to a listed company

For many owners of medium-sized companies this is the dream. There is a common feeling that selling to a big buyer with deep pockets is the easiest and most rewarding option. But appearances can be deceptive. The M&A experts at Taurus Corporate Finance* know where the pitfalls in the process lie.

If medium-sized companies sell their business to a listed company, this sets a certain dynamic in motion. These are the most important points:

• Listed entities take their responsibilities seriously. They need to comply with (international) regulations and cannot just accept the entrepreneurial spirit of medium-sized companies. Both parties need to be aware of this gap.
• Listed companies hire corporate consultants for their due diligence research. These consultants are typically from the “Big 4” accounting companies and multinational legal firms. These consultants need to offer reliance on medium-sized companies to listed companies. This means they need to be as meticulous as possible. As a result, processes are sometimes held hostage to lengthy questionnaires and siphoning off responsibilities. For an entrepreneur, this can be frustrating.
• Listed companies are often in a position of power and this means that they have to be careful about safeguards for good business practice. They often deal more carefully than medium-sized companies with competition authorities, trade unions and works councils, for example, and this leads to many preconditions for a deal. As a result, there is often more than a month between signing and actually (being able to) effect the acquisition.
• In the medium-sized market, most deals have a ‘locked box’ closing mechanism. This implies that a deal effectively goes back to 1 January of the current year. This simplifies the deal because most of the financials are conclusive on signing. With listed parties, however, the legal date is usually the same as the signing date. This means that on the transfer date not all financial information is available and it is necessary to work with closing accounts. Locked box is favoured by the seller because it gives more certainty, especially in dealing with a major listed company.
• Publicly listed firms are (typically) very aware of the public view of their legal actions and would like to avoid any possible post-deal legal actions. Therefore, they ask for relatively high escrows or try to obtain external insurance for any potential warranties and indemnities issues. This again will lead to a more risk oriented due diligence research.

We have already successfully sold several medium-sized companies to listed companies and would be happy to support you.

Mark Eenink, Partner, Taurus Corporate Finance*, Deventer, Netherlands

In short, as is often the case, everything has its advantages and disadvantages. However, selling to a listed party simply requires an extra careful approach and companies must ensure that they assist the buying advisors well in their work.

For further information please contact:

Mark Eenink, Partner, Taurus Corporate Finance*, Deventer, Netherlands
Email: m.eenink@taurus.nl

*ECOVIS cooperates with Taurus Corporate Finance, a Netherlands based Corporate Finance firm with office in Deventer