A successful family business doesn't need to actively seek buyers - sometimes they come forward on their own. „In a recent conversation, a client told me that a few years ago they received an unsolicited takeover offer for their family business. They hadn't thought about selling at the time, so they declined. But now that the family has decided to entrust the future management of the company to someone else, they regret a little that they did not take the offer more seriously. In my experience, similar stories are common among family businesses,” says Balázs Gál, M&A Director at Moore Hungary Financial Advisory.
Evaluation of purchase offers for a family business
The evaluation of takeover bids is primarily the responsibility of the business owner - especially if he is also a managing director. In a family business, family members may have an opinion on the offer, but if someone is not the owner or managing director, they have no legal responsibility for evaluating the offer. However, it is important that decision-makers take into account what the business means to the family, as this may influence how they evaluate the takeover bid.
Price is not everything in an acquisition
“Just because the price is right, doesn't mean the timing is optimal,” says Gabriella Huth, partner at Moore Hungary Financial Advisory. If the family business is on a growth trajectory or has its own acquisition plans, it can achieve a higher valuation later on. It's important for business owners to understand the risks and opportunities associated with the timing of a transaction and to be well aligned with the dynamics of the company and the industry.
Evaluation of an unsolicited buyout offer
An unexpected takeover offer should be examined from several angles. Why did the buyer make an offer? What changes can be expected after the transaction? For a strategic buyer, there may be operational changes, while for a financial buyer, debt growth and cost reduction plans may be important. These can all influence how a family business evaluates the offer.
Can the takeover offer be taken seriously?
A takeover bid is valuable if the buyer has the financial resources to complete the transaction. If the buyer wishes to remain anonymous, it is worth being cautious and gathering appropriate information about his seriousness. „Be sure to get information on the seriousness of the buyer before entering into any meaningful negotiations,” advises Ákos Boross, Managing Partner at Moore Hungary.
The importance of pricing and transaction terms in an acquisition
The initial price of a buyout offer may seem attractive, but after more detailed consideration, the offer may not be as advantageous. The nominal purchase price may even depend on future performance, and this can carry significant risks. It is important that the offer includes full details of the transaction terms.
The role of property in the sale of a family business
Many family businesses have significant real estate assets, and this can affect the valuation of a takeover bid. The relationship between the value of the property and the operation of the business may require special considerations. Outsourcing the property prior to the sale of the business may be an option to ensure that the property remains in the family.
What happens after the sale? Plans for the use of the proceeds
After an acquisition, the use of the proceeds is a key issue for the family business. Dividing the proceeds among family members or reinvesting them in new investments are all decisions that can have a long-term impact on the future of the family. It is important to consider what the consequences of the sale might be for the family as a whole.
Rejection or acceptance of the takeover offer
The first reaction of many business owners is to reject an unsolicited takeover offer. However, it may be worth investigating who is interested in the company, why, and for how much they would be willing to buy it. Negotiations with the primary buyer can often result in a quicker transaction, but it is important to compete offers by involving multiple interested parties to achieve the best terms.
The entire sales process and optimal acquisition
If the owners decide to sell the family business, it may be worth starting a full sale process. This includes contacting potential buyers, evaluating offers, and conducting financial, legal and tax due diligence. Although this can be a time-consuming and costly process, it is one of the most effective ways of achieving the best terms.
Putting together the right transaction team
Accepting or rejecting a takeover bid is a serious decision that requires experienced advisors. Key members of the transaction team are the transaction lawyer, tax advisor and financial advisor, all of whom help sellers make the best decisions. Without such a team, a family business can easily be at a disadvantage in an acquisition process.
Moore Hungary
Moore Global, which started in a London office more than 110 years ago, is now one of the world's leading consulting and audit networks. Present in over 100 countries worldwide, the network has more than 600 independent offices and over 30,000 employees. The group's turnover for the last financial year exceeded $3 billion.
Moore Global's services will be directly available in the domestic market from March 2021. Moore Hungary has been offering a full range of consulting services in the fields of business, financial, tax, accounting and auditing with a team of almost 100 experts since its inception.
In our fast-changing world, Moore provides strategic guidance and practical advice to help clients navigate and understand the complex regulatory and changing market environment and industry conditions, and thereby find the best solutions.
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