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The Challenge of selling SMALL and MEDIUM SIZE COMPANIES in Brazil

Edson Gissoni – Executive Partner of DMS PARTNERS

The market for mergers and acquisitions of small and medium-sized companies in Brazil, according to the Fusões & Aquisições portal, continues to be heated, with operations with a transaction value of up to R$50M representing, in 2022, 68.3% of the total number of transactions carried out in the period (1197 transactions out of a total of 1752 in the period).

When considering transaction values of up to R$500M, this percentage rises to 91.8% of total transactions (1608 transactions out of a total of 1752 in the period).

With regard to the amounts transacted, operations with a value of up to R$50M

moved around R$17B, growth of 9.7% over the amounts transacted in 2021, reaching an average value of R$14.2M per operation.

Most of the founders and/or owners of companies with this profile (small and medium-sized companies), at some point in their business cycle are faced with the need and/or desire to achieve a return on the investment of a lifetime of work and dedication. .

Motivators can be as varied as possible, from the lack of potential successors who can continue the venture, to simply the desire to have more time to dedicate to personal or family interests.

The majority of these owners, however, have difficulty, fear or are unaware of the best way to carry out the process of preparing and putting their business up for sale.

Some believe that they can conduct the process on their own and end up frustrated, after some failed attempts, where after approaching some potential buyers and/or investors with an unstructured offer, they find themselves faced with offers of much lower value than desired or with derogatory comments regarding your business.

The process of selling a company, unlike the process of selling other assets such as real estate and vehicles, is complex and necessarily requires professional support in its structuring and management.

It is the sale not just of an asset, but of a business operation where, on the part of potential interested parties, all commercial, operational and financial aspects will be evaluated and possibly audited, to arrive at a reference value for negotiation.

Not only internal aspects will be considered, but also external aspects such as, for example, the market where the company operates and its growth expectations (of the market and not just the company), possible risks to be mitigated and opportunities for synergy between the company's operations being sold and the operations of the potential buyer.

When conducting the process of preparing and selling companies by specialized professionals, several steps are taken (theme of our next article) with the aim of achieving success in closing the transaction, but it is worth highlighting that in addition to specialized technical and commercial knowledge on the topic, One of the main positive factors that external consultancy contributes to the process is the possibility for the owner-partners throughout the process to remain as the last instance of negotiation, avoiding frustration or unnecessary wear and tear that often end up generating loss of value in the transaction.

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