This topic was addressed recently during a study day organized by the UPIC (see box), in collaboration with other business transfer specialists, in an effort to identify concrete solutions. Currently, this issue is addressed through several financial techniques, which can be summarized as follows:

  • Debt pushdown: This involves placing debt directly into the target company instead of the acquisition holding company, leveraging "financial assistance" governed by Articles 329 and 629 of the Companies Code. This mechanism necessarily requires that the target company has sufficient equity (distributable reserves) and involves strict compliance to avoid legal and tax pitfalls.

  • Separation of real estate and operations: This can be achieved through a standard sale of the property, a partial demerger—provided non-tax business reasons can be demonstrated, which is often the case during a business transfer—or a sale-and-leaseback transaction. This approach allows for the involvement of a third-party real estate investor or enables the seller to retain the property and lease it back to the buyer.

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In all cases, these techniques assume the existence of sufficient profitability to support a arm's-length rent. Where profitability is lacking, the legitimacy of the underlying business activity must be called into question. Might it be better to relocate operations to smaller premises, or even liquidate the business? If the net asset value exceeds the earning power value, this question—delicate though it may be—must be asked.

There are, however, edge cases where the core business is sustainable and the buyer competent, yet the property's objective value creates a financial mismatch. For these situations, the UPIC advocates going further. The tracks explored in this context include:

  • Extending financing maturities: Even if the financial institution holds no collateral over the property, it could consider that the existence of this tangible asset justifies a longer financing tenor, for instance 10 years. It is worth noting that this idea is already gaining traction, with certain banks accepting extended maturities on a case-by-case basis.

  • Greater involvement of regional investment funds ("invests"): These regional financing bodies, already highly active in SME funding, have a mission to support employment and local economic anchoring. It therefore appears justified that they take a frontline role in providing subordinated loans with sufficiently long maturities and substantial principal amounts. Supplementary guarantees from Sowalfin can complete the financing package. The objective is to deploy existing instruments more proactively whenever necessary.

  • Dedicated investment fund: This fund would acquire the real estate asset (either asset-side or share-side) and grant the buyer a lease, potentially paired with a purchase option. In the latter case, this would effectively act as a real estate warehousing mechanism ("portage"). The fund could be capitalized through private and public resources, though the underlying business case must first be supported by a thorough study—a task the UPIC intends to undertake.

The societal stakes surrounding business transfers are significant. Real estate, which is generally a balance sheet asset for the company, must not turn into a liability at this critical juncture. Several tools already exist, which can certainly be refined further.