Sale process

Disposal of a part or the whole ownership stake in a company is more likely to be successful if it is performed in a structured and organised way since this is a complex process which is not subject to day to day activities of the seller (or buyer). GRUBISIC & Partners could assist you as project manager and financial advisor and accordingly will provide you with support in structuring, preparation, managing and closing of transaction. Although each transaction is unique, we have listed below short description of steps which are common to each transaction in an organised process of disposal of privately owned, unlisted company, which could be adjusted to circumstances specific for individual transaction.

Before the sale process begins
  • Management - If we assume that the company has professional management (the functions of ownership and management are separated), it is important that management is informed about the owner’s decision on disposal. Since new owner could alter position, status and compensation of the management, it is important to set up mechanisms which would motivate management to fully cooperate in disposal process.
  • Valuation – GRUBISIC & Partners will perform valuation of the subject of transaction using one or combination of the following methods: (1) discounted cash flow (DCF) model; (2) valuation using comparable transactions in the same industry; (3) valuation based on indicators for comparable companies listed on stock exchange. The purpose of valuation is to create realistic expectations of the  pricing range from the seller’s perspective.
Transaction preparation
  • Setting up the team - adequate preparation is, as in most things, key for successful transaction process, and implies setting up a team which will comprise, alongside GRUBISIC & Partners, someone who is familiar with the process of preparation of financial statements of the subject of the transaction (e.g. accountant or auditor) and legal advisor specialised for mergers and acquisitions. If necessary, the team could also comprise technical experts. Certainly, apart from advisors, company’s management or other company’s representatives form part of the team.
  • Transaction structuring – GRUBISIC & Partners will propose to sellers transaction structure which presumes clear identification of the subject of transaction and the course of its completion (e.g. whether it is share or asset deal, whether the subject of the transaction is business and/or related real estate etc.), taking into account optimisation of tax and other economic effects of the transaction on the seller and tax or other limitations which could affect the structure of the transaction.
  • Vendor due diligence – GRUBISIC & Partners will perform, along with other team members, light version of vendor due diligence in order to detect potentially problematic areas or “deal breakers” in early stage and to avoid late surprises and remove some deficiencies or find appropriate ways to address problems identified during vendor due diligence.
Creating list of potentail investors (buyers) and preparation of transactions documents
  • List of potential buyers - GRUBISIC & Partners will prepare a list of all potential strategic and/or financial investors. Strategic investors are generally companies which are from the same, similar or complementary industry, while financial investors are most often private equity funds.
  • Initial information (Teaser) – GRUBISIC & Partners will prepare a short document with basic information on the subject of transaction. The purpose of this document is to send initial information to potential investors on the intention of disposal and the subject of transaction, without disclosing confidential or sensitive information.
  • Non Disclosure Agreement (NDA) – It is a common procedure that interested buyer signs the agreement committing to protect and not to disclose any kind of data or information received in the disposal process.
  • Information memorandum – GRUBISIC & Partners will prepare document with detailed description of the subject of transaction which will contain information on products and services, markets, customers, suppliers, historic and projected financial reports etc. Based on the information memorandum, potential buyers should be able to decide whether they will send indicative (non-binding) offer. Information memorandum will also include problematic areas identified during internal (vendor) due diligence because increased transparency could decrease the risk perceived by the potential buyer. Lack of transparency means less trust which could easily be reflected in price that the buyer is prepared to offer.
Communication with potential buyers
  • Initial contact - GRUBISIC & Partners will make initial contact with potential buyers and shortly present the subject of transaction (without disclosing the name if required by seller) such as geographic area, industry, range of revenues, etc. In case the buyer is interested to receive additional information, teaser and non disclosure agreement will be delivered to the potential buyer.
  • Sending information memorandum – After initial information received in teaser, information memorandum will be delivered to buyers interested in further disposal process (after signed non disclosure agreement is received).
  • Non-binding offers – From the moment of sending information memorandum, GRUBISIC & Partners will be available to answer interested buyers additional questions and to send additional documentation. Based on data and information received, buyers will be asked to deliver non-binding offers. After evaluation of these preliminary offers, the seller will prepare short list of interested buyers and allow them to proceed with due diligence.
Due diligence
  • Due diligence documentation - GRUBISIC & Partners will assist the seller with preparation of legal, technical, commercial and financial documentation which will be available to interested buyers in data room.
  • Data room – GRUBISIC & Partners will organize terms and coordinate due diligence process in data room. If necessary, we will organize visits to production and distribution premises, warehouses and other premises and locations within due diligence process.
  • Management meetings – Within due diligence process, the management needs to be prepared for meetings with interested buyers, where they will likely have to present their vision of future business and further developments of the company and secondly answer questions of investors and their advisors.
  • Draft Share Purchase Agreement – After finishing due diligence, the proposed Share Purchase Agreement (SPA) will be delivered to interested buyers.
Binding offers and negotiations
  • Binding offers - After finalization of due diligence and receiving proposed SPA, interested buyers will be invited to deliver obligatory offers with clearly emphasised preconditions which should be realized in order to accept their offer. Examples of preconditions set in the offer could be request for additional due diligence, additional guarantees from the management or seller, extenson of important contract with customer, etc. The offer should contain evidence on possession of adequate funds for financing the transaction.
  • Final negotiations – Only the best offerers will enter into final negotiations on price and final terms and conditions necessary for closing of transaction. Interest of the seller in this stage is to close the transaction as soon as possible since this is the most sensitive stage from the beginning of the process. GRUBISIC & Partners will actively participate and advise the seller in final negotiations and protect its interests as much as possible, but also considering that it is the intention of all interested parties to successfully close the transaction.

Transaction closing

Legally binding relation between the seller and the buyer starts with signing of share purchase agreement. Signing of share purchase agreement and/or transaction payment could be delayed for the reasons not relating to mutual consent between the parties – e.g. the acquisition needs to be approved by the general assembly of the buyer company or by regulator. It is common procedure that part of the agreed transaction price is paid in a special account to allow verification of fulfilment of certain conditions from the contract – e.g. the seller has guaranteed certain level of inventory at the date of transaction’s conclusion which requires checking balance sheet at the date of transaction’s conclusion.

Share Deal vs Asset Deal

  • Company take over assumes that the buyer will purchase shares or stakes from the company owner. With the purchase of shares, buyer becomes the owner of legal entity and acquires company’s assets as well as all existing and potential liabilities and debts. Also, all company’s contracts with all related rights and obligations are taken over. Such structure of transaction is so called share deal.
  • Disposal of business on the other hand does not necessarily mean that the buyer will acquire ownership over the legal entity (the company). The buyer and the owner of the company could agree that the buyer will take over assets and part of precisely defined liabilities, certain contracts, employees etc. This means acquiring the business and not legal entity. Such structure of transaction is called asset deal.
Share deal and asset deal are different from economic and legal aspects.
  • Share deal:
    • Shares and equity stakes are transferred from the seller to the buyer.
    • Company’s operations continue to be performed irrespective of the change in ownership.
    • Benefits, costs, rights and obligations associated with the existing assets and liabilities (debts) remain within the company and all potential risks associated with realization of the above are usually taken over by the buyer.
    • Net carrying values of the assets and liabilities remain unchanged and continue to be depreciated as before the transaction.
    • The buyer pays the agreed price to the owners of the company, and the owners pay capital gains tax (if such tax exists in jurisdiction where the transaction takes place) calculated as the difference between the price at which the shares are sold and the price at which they were acquired.
  • Asset deal:
    • The buyer does not take over shares or stakes in ownership or overall ownership over the company as a legal entity.
    • The company’s operations are continued under different legal entity (the buyer needs to create a new legal entity or use existing one for completing the transaction and further operations).
    • The buyer is exposed to smaller risk as possibilities of adverse effect arising are minimized since within the asset deal, apart from the assets, only certain liabilities have been take over.
    • New entity should take over particular assets and liabilities as agreed with seller, make new contracts for employees which were employed in former company and are now transferred to a new entity, resolve issue of brand usage, etc. (asset deal is generally legally more complex than share deal, which could make its processing more expensive).
    • From the accounting perspective, as a result of such transaction, the buyer in its balance sheet is recording fair market value of the acquired assets and liabilities (which could be higher or lower that the values in seller’s records) and are depreciated in future periods.
    • The buyer will transfer the funds on the accounts of the company which assets had been sold. If the selling price is higher than its carrying value, the company will record this as income which will be subject to corporate profit tax at the year end.
  • The seller will generally prefer share deal as it offers the complete exit from the business (legal entity) as well as from the risk to which the business was exposed. In most jurisdictions, share deal is more favourable for the seller from tax perspective. In asset deal, the company is paying tax on difference between selling price and carrying value of assets, which is additionally taxed in dividend payment.
  • The buyer will prefer asset deal in case of any doubt relating to existing and especially to potential liabilities, which represent unacceptable risk for the buyer. Asset deal is of particular interest for the buyer if acquired assets could be revalued to fair market value (paid amount) in its records which will increase depreciation cost in future periods and decrease taxable profit thus increasing cash flows due to smaller amount of corporate profit tax paid.
  • Whether the transaction will be structured as share or asset deal depends on numerous factors important for the seller and the buyer. Irrespectively of the type of transaction, we expect that both parties should be prepared to some sort of compromise. For example, in case of share deal where all risks are transferred to the buyer, it is possible that the buyer asks for longer period to perform due diligence or offer lower price to compensate for the additional risk as opposed to asset deal.

Spin off / Carve out

  • Companies i.e. owners of companies often decide to extract a part of the business and sell it (carve out). Reasons for such act could be numerous such as situations wherein extracted segment does not represent the core business, impossibility to achieve profitability for certain reasons, lack of managing capacity, small market share, disposal on request of the regulator due to market concentration in particular segment, etc. Sometimes, when selling a company that has number of different types of products (e.g. drink’s producer is producing water, alcohol and non-alcohol drinks) it is difficult to find a buyer which is interested in all segments and therefore the company is divided into its business segments to become more attractive for potential buyers.
  • GRUBISIC & Partners will assist you with carving out part of business in a separate company and with preparation for its disposal. It is very important for buyers to have a clear picture on the subject of the transaction. Such situations require preparation of separate financial statements for the newly established company and determining which contracts, rights and obligations will be transferred to a new company. During the carve out, it is not always easy to determine historic profit and loss account because often some expenses have been allocated using the allocation keys, and some part of assets and liabilities are used by all parts of the company.
  • After the carve out process, GRUBISIC & Partners will, as project manager and financial advisor, perform all necessary steps (as described in the process of company disposal) in order to successfully close the transaction. In some cases it is possible that disposal process runs simultaneously with carve out process, although it is advisable to perform carve out before the disposal.

For detailed scope of activities performed by GRUBISIC & Partners within this service please visit

Scope of activities