When is the right time to sell your company?

This motivation, while understandable, is nonetheless dangerous. Buyers quickly recognize a company’s lack of future prospects and will turn away. Without future cash flow, bank credit remains out of reach, making the chances of a successful sale minimal. Those who think they can convince a buyer by masking figures usually lose all credibility when the deception is uncovered before the sale during the audit, or head straight into litigation post-sale via representations and warranties (asset and liability guarantees).

The crisis environment, on the other hand, holds back another segment of prospective sellers who fear their business will only fetch a low price, if it sells at all. While buyers and bankers have indeed become more cautious, this fear should not be exaggerated. Our experience shows that the M&A market remains very active and every solid project finds funding.

The economic climate leads many highly qualified, experienced executives to reposition their careers. Many naturally turn toward acquiring an SME. Admittedly, the financial crisis led to lower valuations, though within limited bounds and to varying degrees depending on the sector.

Regarding valuations, it is more accurate to view pre-crisis prices as unreasonable, meaning we ultimately experienced a healthy market correction. It therefore seems unlikely that future prices will rise substantially, barring a return to a period of "irrational exuberance" in the markets.

Furthermore, the current tax context introduces an additional layer of uncertainty for anyone considering a business exit.

The risk of introducing a capital gains tax on shares—despite being harmful to our family businesses—was previously covered in a dedicated article (LLE, December 11, 2010). More recently, the Di Rupo note unfortunately confirmed this tax proposal. While the likelihood of seeing this tax implemented in our country is rising, no one knows when it would take effect or what its scope and rates would be.

So, when is the right time to sell a business? Should one wait to exit, or on the contrary, move forward as quickly as possible?

The macroeconomic and tax considerations mentioned above, while by no means negligible, seem secondary compared to the true stakes. The internal timing of the company and its shareholders must take precedence over external market conditions. How many small SMEs have collapsed when their managing director suffered a health crisis? How many business leaders waited too long to sell, ultimately becoming hostages to their own company? One must know when to step down in time.

Even though this message is widely communicated, most leaders of family businesses have not sufficiently planned their succession. Keeping their nose to the grindstone, they sometimes forget the essential. Yet a transaction must be prepared well in advance. The functions fulfilled by the seller must be delegated so they can make themselves dispensable. The corporate structure must be adjusted (for instance, carving out real estate unrelated to operations). If earnings were historically minimized for tax purposes, it may be wise to "dress the bride"—that is, highlight the true profitability in official accounts.

In short, it is far better to plan the exit several years in advance to execute the sale under optimal conditions. A business owner who decides in time to take control of their fate will stand a much higher chance of selling well. By controlling the M&A process, they can bring multiple suitors to the table. Generating competitive tension not only secures a better price, but it also reassures prospective buyers, who reason that the company must be attractive if others are bidding for it.

The way an exit process is organized reflects the operational quality of the company itself. All these elements—entirely within the business owner's control—are far more relevant than the broader economic context, which remains utterly unpredictable. Rather than scanning the skies to predict the weather, which remains highly uncertain, it is much better to take the initiative.