The sonntag method
The consultancy market shows numerous methods of determining the purchase price. We have moved away from the classical methods of theoretical corporate valuation and instead determine the real purchase price of the companies on the market.
We are the only provider in Germany to obtain purchase prices on an anonymous basis, which exceeded the expectations of our clients last year by an average of 78 percent. Discretion is one of the most important criteria when selling your own company. The operation should not be restricted, employees should not be disturbed and customers should not be scared. Therefore, selling the company must lie in trustworthy M&A hands. With our anonymous market value determination, you know who is willing to pay how much for your company and nobody knows that you are planning to sell your business. With each step we take, you will be close to the actione and define what information you want to reveal.
How do I sell my company?
A company sale will sonntag follows a two-phase model, with timetable planning and determined goals. The project teams work focused and concentrated with you during the whole process to ensure an excellent transaction.
- In the first phase we undertake your company our anonymous market valuation determination. Hereby we focus on research of potential buyers and the creation of the basic process documents such as the information memorandum.
- Once you approve the list of potential buyers, we will send out our anonymous presentation letters by post.
- Within a (two-week) deadline, potential buyers should submit a first purchase price indication for your company. If necessary, we comprehensively follow-up with all parties to obtain the broadest possible range of indications for your company. If you're convinced by the purchase price offers, you can decide whether and with whom you want to usher in the second phase for the sales transaction.
- In the second phase, we'll reveal your identity in order to conduct initial discussions with the selected potential buyers so that you present yourself and your company and get to know the potential buyers.
- By signing the purchase intent, you and the prospective buyers confirm their interest in selling and buying a business. This puts your company to the test, the due diligence, on the part of potential buyers.
- In the last step, you and the buyer enter into the sales contract negotiations - ideally with the contract conclusion!
Theoretical assessment vs. market value determination
Conventional mathematical finance methods used in the market such as "earnings value" and "discounted cash flow" (also in the variant "adjusted present value") render a theoretical, mathematically inferred company value. The method however does not answer the question whether or not this value can actually be achieved in the market. Respectively, a mathematically determined value harbours considerable insecurities in terms of actual feasibility in the market and the associated probability of occurrence.
What aggravates the situation even more are the low interest rate levels, which have been prevailing for years. This artificially inflates the values resulting from the CAPM model. As a correction factor for this imbalance, besides other variables (fungibility discount), the company-specific beta is used more frequently, which already is problematic for SMEs.
The company-specific beta is inferred from the assessment of listed companies. The transferability to SMEs has always been a principle point of criticism in terms of standard methods. Factually, the beta already is one of the main manipulators within the framework of the assessment of SMEs. If the beta is now additionally used as a correction variable for the low interest rate effect, the strength of the assessment will take on an extremely arbitrary character.
As a member of the expert committee of Finance magazine, we, together with other renowned consulting forms, determine the industry-typical EBIT and sales multipliers for the company value of SMEs. The basis for this contribution are the company-specific multipliers, which we actually determine in the market during the course of our consulting activities.
The assessment of the company takes place directly in the market in the form of an anonymous bidding procedure. Based on anonymous actual and target figures for income statement and balance sheet (pursuant to the IDW Standard S1), the interested parties submit an offer for the company without knowing its identity. Only the industry in which the company is active is disclosed.
The finance mathematical assessment basis of the valuation can be freely chosen by the potential buyers (EBT, EBIT, EBITDA, free cash-flow or transaction volume) and is intentionally not made mandatory. Neither is the time period the assessment is based on (actual, planned or mean). As a result, the assessment bases of all conventional market methods are included in the determination of the company-specific value.
We have been working with this method very successfully for several years, which clearly differentiates itself from older methods and replaces the finance mathematical value with an actual, stable market value.
Anonymous bidding process adds 70 % more value
The company value should never be confused with the actual price that you can achieve on the market. This could mean that if demand for certain goods is low, the price is significantly lower than the actual value, or conversely, prices for coveted goods are significantly higher than the calculated values. Emotional reasons, the liquidity of the market, the rationality of the market players, panic and euphoria, as well as very different views on the future course of business can make the difference.
As the only consulting company in Germany, we initiate a "blind" bidding process for all parties, being interested in our clients companies - without disclosing their identity of course. You will receive an average of 14 offers for your company from the market in a maximum of three months. The expectations of our clients are usually exceeded by 70% on average. You then decide freely based on actual demand, whether you are willing to sell and with whom you may enter into negotiations. In 2018 we were awarded for this innovative, in Germany unique form of market valuation. WirtschaftsWoche awarded us the seal of excellence as part of the Best of Consulting Awards for SMEs - M&A.
Convince yourself of the results: References