Lorenz Meier successfully built up his company over seven years and then sold it. He shares his experiences.
So you've worked hard for years and suddenly an "exit opportunity" appears on the horizon? Congratulations! You've built something valuable. Someone is willing to pay a substantial sum for it. Are you ready to sell your company?
I founded Geopraevent together with partner and investor Geotest AG in 2012. Geopraevent's mission is to offer state-of-the-art technologies for natural hazards such as snow avalanches, rockfall, debris flows and rock and ice instabilities. We use innovative measurement technologies such as interferometric and Doppler radars or automatic image analysis in operational projects - until now, such systems have mostly only been used in research projects. We provide local authorities with real-time warnings or even close roads with traffic lights within seconds after a radar system has detected an avalanche further up. In the first eight years, we grew from three to 30 employees and operated around 150 operational stations in twelve countries at the start of 2020. Financially, we achieved an annual turnover of over CHF 5 million (20-30% of which was recurring) with very good profitability.
In 2018, we were approached by Hexagon about a possible takeover. I had never considered selling Geopraevent before. Long discussions followed and after almost two years I thought that a sale would be an interesting opportunity for the company, our employees and us former owners.
Not everything went as expected, so here are my seven lessons learned from my sale:
- Do you know why you want to sell your baby?
We were in a scaling phase. Our services were working well in Switzerland and a few other countries. We expected that we would be able to penetrate new markets more quickly within the network of a global company. We also expected synergies in research and development with the buyer, which would lead to better products that we could use for our solutions. And to be honest, I'm personally more intrigued by starting something new than taking something that already works well into new markets. Besides, selling a company sounded very exciting. I would certainly learn a lot in the process!
- Your company is also a platform
It's a platform to meet people - be it employees, partners, suppliers, customers, students, professors... As a founder and CEO, you get invited to events or talks and it's quite easy to get in touch with interesting people. Think about how you can maintain this network after the sale.
- You will have a boss
A group manager will be responsible for your business. Are you prepared for this after years of being able to make many decisions yourself and for good?
- The culture will change
It will be different for your employees to work for a large corporation instead of a small, owner-managed company. There will be more rules and a new compliance department.
- Define the share purchase agreement
If your share purchase agreement (SPA) provides for an earnout, make sure it defines very clearly how the collaboration will work. Where will the synergies come from? Does your company have to pay for the buyer's services or sales efforts? Is the buyer's sales staff even capable of selling your products or services? Do they have the right financial incentives to actually do so?
- Define follow-up actions
In the event that you disagree with the buyer on synergies and earnout after the acquisition, it should be clearly defined what financial penalties a breach of the SPA rules will result in. If this is not the case, you will need to demonstrate the financial consequences for your earnout. This can be difficult, for example if a promising project was not won as a result of unsuccessful collaboration.
- Have a plan for the time after the sale
If you are interested in mine: familytour.ch