Sale of company due to retirement or testament I Business Valuation

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Sale of companies

Selling a business is a complex process that involves a series of stages and strategic considerations, from the initial assessment of the value of the business to the negotiation of the final terms of the deal, each step requires thorough analysis and careful planning, the owners of companies often consider selling for a variety of reasons, ranging from seeking liquidity to start new projects until retirement and business succession, In the sales process, it is crucial to identify and understand the target market, as well as take into account legal, financial and tax aspects, in addition, the adequate preparation of the company for sale, which may include the optimization of assets, the Improved management and transparent financial reporting can significantly increase your perceived value to potential buyers. 

Once a potential buyer is found, the negotiation process begins, which can be complex and lengthy as both parties seek to obtain the best possible deal. Ultimately, the sale of a company can represent an exciting opportunity for the buyer. seller, as well as a significant milestone in the evolution of the business and its legacy.

Reasons to sell a company

There are several reasons why owners decide to sell a company:


  1. Liquidity Opportunity: Sometimes owners seek to obtain liquidity to invest in other projects, diversify their portfolio or address personal financial needs.


  1. Change in personal circumstances: Events such as retirement, health problems, or changes in family situation may lead owners to consider selling their business.


  1. Lack of resources for growth: If a company needs additional capital to expand but cannot obtain it internally or through external financing, selling may be an option to obtain the necessary resources.


  1. Competitive challenges: In some cases, owners may face difficulties in maintaining competitiveness in the market due to changes in the industry, technological advances or the entry of new competitors, selling the company may be a way to avoid further losses.


  1. Business succession: When owners wish to retire and do not have a suitable successor within the family or company, sale may be the best option to ensure business continuity.


  1. Value Maximization: Sometimes owners may decide to sell the company when they believe they have reached their maximum growth potential and the time is right to obtain the best possible price in the market.


  1. Change in business strategy: If the strategic direction of the company changes and no longer aligns with the owners' goals or interests, they may choose to sell it and focus on other projects or areas of interest.


  1. Financial problems: In situations where the company is facing significant financial difficulties and recovery is not feasible, a sale may be the best option to minimize losses and avoid liquidation.


These are just some of the most common reasons why owners may choose to sell a business, the decision to sell should always be based on a careful evaluation of the internal and external factors affecting the business, as well as a clear understanding of the objectives and priorities of the owners.

Sale of company due to retirement

The sale of a business due to the owner's retirement is a common and significant situation in the business world, after years of dedication and hard work, many owners reach a point in their lives where they want to retire and enjoy the fruits of their business. his work, Retirement can be both an exciting opportunity and a complex process that requires careful planning.


For many owners, the sale of their business becomes a way to ensure their financial well-being during retirement, providing a substantial source of income that allows them to enjoy a comfortable and secure retirement, in addition, the sale can represent an opportunity to leave a strong business legacy and ensure business continuity under new leadership.


However, selling a company for retirement is not only a financial issue, but also an emotional one, since for many owners, their company is more than a business asset: it is the result of years of dedication, sacrifice and passion, therefore , it is crucial to approach the transition with sensitivity and consideration toward the owner, as well as employees and other stakeholders.


The process of selling a company due to retirement generally involves evaluating the value of the company, identifying potential buyers, negotiating the terms of the agreement and transitioning to new leadership, it is essential to have the support of professionals, such as financial advisors and attorneys, to guide homeowners through this process and ensure informed and strategic decisions are made.


Ultimately, the sale of a business for retirement marks the end of an era and the beginning of a new stage in the owner's life, it is a time to reflect on past achievements, celebrate the business legacy and look to the future with optimism and gratitude for the opportunities that are to come.

Transfer of company by testamentary

The transfer of a company by a testamentary refers to the transfer of ownership or management of a company as stipulated in the will of its original owner, which occurs when a business owner dies and in his or her will appoints a person, known as the executor, to manage his or her assets and property, including the business.


The transfer process may vary depending on local laws and the specific provisions of the will, in many cases, The will maker acts as a temporary administrator of the company until it can be determined what will be done with it according to the instructions in the will, this may involve selling the business, transferring it to a designated heir, or liquidating the assets.


It is important that the will maker fulfill all legal and fiduciary obligations in managing the business, acting in the best interests of the beneficiaries of the will and in some cases, it may be necessary to obtain court approval to carry out certain actions. related to the company.

What happens to the business if there is no will?

The act of writing a will prevents uncertainty about the future of a business in the event of the entrepreneur's death, by clearly establishing the fate of the company's shares.


The absence of a will not only exposes shareholders and family members to risk, but also employees, since a lack of clarity can lead to dismissals and, in extreme situations, the collapse of the company.


The challenge is that in Mexico a tradition of writing wills has not taken root; when a shareholder dies, the succession process can last more than a year, since an intestate succession trial needs to be carried out to determine the existence of heirs.


Additionally, if the successor lacks knowledge about the business, poor management could cause the company to go bankrupt.

Disadvantages of not having a will

The lack of a will when owning a company can lead to several disadvantages:


  1. Uncertainty about business succession: Without a will that clearly specifies who will assume control of the company after the owner's death, confusion and disputes can arise between family members, partners or heirs, which could affect the stability and continuity of the business.
  2. Prolonged succession processes: In the absence of a will, the probate process can be considerably lengthened, especially if an intestate probate trial is required to determine the distribution of business assets among heirs, this could result in operational and financial paralysis for the business for an extended period. .
  3. Risk of mismanagement: If the person who inherits the business is unfamiliar with its operation or lacks the skills necessary to properly run it, there is a significant risk of poor management that could lead to the business going bankrupt.
  4. Impact on employees and collaborators: Lack of clarity in business succession can generate concern and insecurity among employees and collaborators, which could affect morale, productivity and talent retention in the company.

Advantages of selling companies due to retirement

Selling businesses upon retirement can offer a number of advantages to both the retiring owner and the business itself:


  • Retirement Liquidity: The sale of the business provides the owner with a significant source of liquidity to fund their retirement, this may include investing in personal retirement plans, diversifying assets or simply providing a financial fund to enjoy retirement.
  • Risk minimization: For owners who view retirement as a transition to a lower-risk stage, selling the business can help minimize exposure to potential business setbacks; by converting business assets into cash, the owner can avoid the uncertainty associated with ongoing management. of the business.
  • Simplification of personal life: Retirement is often accompanied by a desire to simplify personal life and reduce stress, selling the business can free the owner from the responsibilities and demands associated with running the business, allowing them to enjoy a more relaxed and satisfying retirement.
  • Possibility of leaving a legacy: Selling the company can offer the owner the opportunity to leave a lasting legacy by ensuring the continuity of the business under new leadership, this can be especially important for owners who have dedicated many years to the development and growth of the company and wish to see it thrive even after retirement.
  • Financial flexibility: The liquidity gained from the sale of the business can provide the owner with financial flexibility to pursue other interests, such as travel, investing in personal projects, or supporting family, as this financial freedom can enrich the retirement experience and allow the owner to explore new opportunities. and passions.


Selling a retirement business can offer a variety of financial, personal and emotional benefits to both the retiring owner and the business as a whole, it is important to carefully evaluate these advantages in the context of individual goals and circumstances before making the decision to sell.

How to sell a company? Steps in selling a company

General guide to typical steps in selling a company:


  1. Initial preparation: Before beginning the sale process, it is important to prepare the company to maximize its value, this may include organizing financial and legal documentation, evaluating the company's assets and liabilities, and identifying areas of improvement that could be increase your attractiveness to potential buyers.


  1. Company valuation: Conducts a comprehensive valuation of the company to determine its fair market value, which may involve analysis of financial statements, tangible and intangible assets, future cash flows and market comparables.


  1. Identification of potential buyers: Once the company is prepared and valued, identify and evaluate potential buyers, this may include strategic investors, competitors, companies in the same sector or private equity funds.


  1. Confidentiality and disclosure: It is crucial to maintain confidentiality during the sales process to avoid the leak of sensitive information that could affect the negotiation or the reputation of the company, use non-disclosure agreements (NDAs) to protect information during initial discussions with potential buyers.


  1. Negotiation of terms: Once an interested buyer has been identified, the process of negotiating the terms of the deal begins, this may include the sales price, the structure of the deal, payment terms, and any contingencies that must be met before closing.


  1. Due Diligence: Once a preliminary agreement is reached, the buyer will conduct extensive due diligence to evaluate the company in detail, which involves reviewing the financial statements, contracts, assets, liabilities, business operations and other relevant aspects of the company.


  1. Legal documentation: Once the due diligence is completed and the final terms of the agreement are resolved, the necessary legal documentation is drafted, such as the purchase and sale agreement and other related documents, it is essential to have the advice of lawyers specialized in mergers and acquisitions to ensure that all the legal aspects are correctly structured.


  1. Closing of the transaction: Finally, once all the conditions have been met and the final documents have been signed, the transaction is closed. This process involves the transfer of ownership and the payment of the agreed consideration.


  1. Transition and after-sales: Following closure, it is important to ensure a smooth and successful transition for all parties involved, this may include the transfer of employees, customers and suppliers, as well as any ongoing support that may be necessary to ensure business continuity under new leadership.

It is advisable to have the support of professional advisors, such as lawyers, accountants and financial consultants, to guide you through each stage of the process and ensure the success of the transaction.

How does business valuation work in the sales process?

The business valuation In the sales process, it is a fundamental aspect that determines the price at which the company is offered in the market. This process involves an exhaustive evaluation of various financial, operational and strategic factors to determine the fair value of the company based on its performance. past, its future potential and market conditions, valuation methods can vary depending on the nature of the company and the industry in which it operates, but commonly include approaches such as comparative analysis of similar companies, discounting of future cash flows , the valuation of tangible and intangible assets, and the use of revenue or profit multiples, in addition to financial aspects, the valuation can also consider qualitative factors such as the competitive position of the company, the quality of its management team, its base of clients and their growth potential, precision and objectivity in Valuation are crucial to ensure that the sales price adequately reflects the true value of the company and maximizes the return for the seller in the sales process.

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