7 Tips for a Successful Sale of Your Company in the Netherlands

As a Dutch M&A lawyer, I have learned over the years to recognise a number of recurring factors that determine whether the sale of a company in the Netherlands will succeed. These factors apply to virtually every M&A transaction governed by Dutch law, regardless of whether the counterparty is Dutch or based abroad. The Netherlands has long been an attractive place to do business and complete acquisitions, thanks to its stable legal system, central location in Europe and access to the EU single market — which is why we, as a Dutch corporate law firm based in Amsterdam, regularly advise foreign buyers, sellers and investors on Dutch M&A deals. In an earlier blog, I wrote about the 5 phases of a company sale under Dutch law. In this blog, I share the 7 tips that I, based on my own experience as a Dutch M&A lawyer and Dutch corporate lawyer at Penrose, consider most valuable for making a sale process succeed.

Tip 1: seller, know your own company

The sale of a company is largely about one question: does the purchase price a buyer is willing to pay meet the seller’s expectations? Other interests and sentiments may also play a role for a seller, such as preserving jobs for employees or safeguarding the company’s identity. In practice, however, these interests are usually secondary to the discussion about price.

For successful price negotiations, it is important that not only the buyer, but also the seller, has a clear picture of the company’s value. If a seller overestimates that value, it becomes harder to find a buyer. If a seller underestimates it, there is a good chance of being underpaid, or of agreeing too quickly to unfavourable terms.

It is therefore worth involving a financial advisor early in the process. A good advisor can give an early indication of the company’s value, the likely purchase price and current market conditions for comparable M&A transactions in the Netherlands. A good advisor can also provide insights that help align expectations with a buyer, such as the company’s average working capital requirements and how much excess cash could potentially be paid out to the seller before completion.

Tip 2: be prepared

If there is no urgent time pressure, it pays to take the time to properly prepare the sale of your company. Good preparation is almost always rewarded: with a higher sale price, a smoother and faster process, or often both. When preparing a sale, consider the following:

• look for realistic ways to increase revenue and reduce costs (profit optimisation that can be reflected in the forecasts);
• put customer contracts in writing and, where possible, secure them for a longer or fixed term;
• protect intellectual property and know-how;
• make contracts that may be unattractive to a buyer more flexible;
• clean up the balance sheet, for example by collecting outstanding receivables, settling intercompany debts and paying out excess capital;
• pay off unfavourable financing arrangements and release any related security;
• decide exactly what you are going to sell (shares or assets) and structure the company so it lends itself well to a transfer;
• decide who will act as the seller. If there are several shareholders, it is often beneficial to have a joint holding company act as the sole seller — that holding company can then provide the required warranties and guarantees, rather than the individual shareholders;
• identify the people who are indispensable to the business, and try to agree with them to stay on for a minimum period after the transfer.

Tip 3: know your market and potential buyers

If you have a good understanding of the market your company operates in, it becomes easier to identify potential buyers and approach them with a teaser for an initial conversation. As a seller, you ultimately only need one buyer for a successful sale — but finding that one party often means approaching several potential buyers. Approaching multiple prospective buyers has another advantage: it can create a sense of competition between them, which may have a positive effect on the purchase price.

Tip 4: don’t lose sight of the business!

A sale process is intense. It demands significant extra time and attention from management, while the business needs to keep running as usual. When several potential buyers are involved, all wanting their own meetings and information requests answered, it is tempting to focus entirely on the deal and lose sight of day-to-day operations. That can lead to backlogs — in preparing quotes, in handling debtors and creditors, or in attention to staff.

For a buyer, continuity of revenue, timely collection of receivables and retaining key employees are all important factors in determining the purchase price. The health of the business — including during the sale process — should therefore remain the seller’s first priority.

Tip 5: choose the right guidance

As a seller, choose experienced legal and financial guidance, and make sure the professionals you engage — ideally a Dutch M&A lawyer or Dutch corporate lawyer — have a strong track record with M&A transactions in the Netherlands. Buyers are usually assisted by specialised Dutch lawyers and accountants of their own. As a seller, you want to be able to match that, both in the commercial negotiations and in the drafting of legal documentation under Dutch law. Good guidance also makes it easier to keep the focus on the business throughout the sale process (see tip 4).

Tip 6: secure a good letter of intent (LOI)

For a successful business acquisition, a well-drafted letter of intent (LOI) is almost indispensable. There are exceptions, of course — for instance when there is significant time pressure and the buyer immediately puts a draft purchase agreement on the table, or when buyer and seller already know each other well and trust the process. In most Dutch M&A transactions, however, signing the letter of intent is a tipping point: once parties reach that stage, there is a good chance the deal will also reach the finish line.

In a letter of intent, buyer and seller set out in broad terms how they envisage the transaction, without these arrangements being legally binding. In this blog, I share an example of a letter of intent and explain, from my perspective as a Dutch M&A lawyer, the background and purpose of the LOI.

Tip 7: process management: keep the momentum going!

Selling a company in the Netherlands is often an intensive process involving many different parties and people — as it is anywhere in the world. Good process management helps you keep the momentum going, and that matters: an average M&A transaction can quickly take four to six months, from the first introduction to completion.

There is a real risk that the process drags on. Holiday periods can get in the way, or the buyer’s attention may suddenly be split because they become involved in a parallel acquisition process elsewhere. If a sale process takes too long, both sides can become exhausted and irritated — and that is deadly for the atmosphere at the negotiating table.

The passage of time can also cause the company’s value to drift away from the original valuation. If the value increases too much during negotiations, a seller becomes less willing to sell at the original price. If it decreases, it is the buyer who looks for ways to make up the difference — something no seller wants either. So even though self-imposed deadlines are often chosen somewhat arbitrarily, meeting them as much as possible really does matter for a successful acquisition process.

In conclusion

A successful sale of your company in the Netherlands calls for preparation, market knowledge, the right guidance and, above all, patience and oversight. Every sale process is different, but the tips above apply to virtually every M&A transaction I advise on as a Dutch M&A lawyer.

Are you considering selling your company in the Netherlands, or are you a foreign buyer, seller or investor looking for guidance on a Dutch M&A transaction? Feel free to get in touch. As a Dutch corporate lawyer and M&A lawyer at Penrose, I am happy to discuss your situation, wherever in the world you are based.

Frequently asked questions about selling a company in the Netherlands

How long does it take to sell a company in the Netherlands?

A typical Dutch M&A transaction takes around four to six months, from the first introduction to completion. Holiday periods, a competing process on the buyer’s side, or slow decision-making can extend this considerably.

Do I need a Dutch M&A lawyer to sell my company in the Netherlands?

It is not a strict legal requirement, but buyers in the Netherlands are almost always assisted by experienced Dutch M&A lawyers and accountants. Engaging your own Dutch legal counsel helps you negotiate on equal footing and ensures the transaction documents are properly drafted and enforceable under Dutch law.

Can a foreign buyer or investor acquire a company in the Netherlands?

Yes. The Netherlands is generally open to foreign investment, and international buyers regularly acquire Dutch companies. Depending on the sector, specific investment-screening rules may apply, for example in areas considered sensitive to national security, so it is worth raising this with your advisor early in the process.

Other publications by Lukas Witsenburg in this series

Dutch M&A: merger or company takeover in 5 steps

Dutch shareholder disputes

Dutch law example agreements