Many people in Switzerland dream of running their own company. But if you don’t have an innovative idea yet, you don’t necessarily have to found your own company to achieve your dream of independence. Purchasing an existing company is an attractive option and a win-win situation. That’s because around 40% of company owners who want to retire from professional life are looking for an external successor solution. But what does taking over an existing business involve? Find out more about the three key factors.
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Created on 19.10.2023
Buying an existing company: we tell you where to look and how to finance your purchase
Do you dream of being independent but don’t know what kind of business you want to run? Do you see yourself as an entrepreneur but want to avoid having to set up your own company? If so, acquiring an existing company might be the right path for you. We tell you what you need to know when searching for and purchasing an existing company.
Entrepreneurs need to have that entrepreneurial spirit
To purchase an existing company, you need to understand operational processes and be able to think strategically. As winning personalities, entrepreneurs are able to build trusting relationships with employees, customers and suppliers. Developing the company is easy for them, because they are brimming with ideas and creativity. They lead the company with curiosity, motivation and persistence, and they are able to tackle all the challenges they encounter.
Do you have that entrepreneurial spirit?
In addition to the characteristics mentioned above, you should be able to answer the following questions with yes:
- Do you have the necessary skills?
- Do you have a clear vision?
- Are you ready to take risks?
- Do you have staying power?
- Do you take responsibility for yourself and others?
- Are you resilient?
- Can you keep a clear head even in turbulent situations?
- Can you handle setbacks?
- Do you have the confidence to manage a company?
Useful information: advantages and disadvantages of purchasing an existing company
When you take over an existing company, you can generally count on experienced employees, reliable suppliers and loyal customers. The company will also already have structures and processes in place, and the company’s sales representatives will often be available to provide advice, which makes getting started easier. At the same time, you should be aware that you suddenly have to take on full responsibility and that there will be an established corporate culture that you may not share. Drastic changes are usually difficult – or at least, they may take a long time to implement.
Finding the right company
If you see yourself becoming an entrepreneur, it makes sense to start looking. At best, the company where you’re working is looking for a succession plan, or you can buy an existing company in your personal environment. If this is not the case, you could find a suitable offer online on various company marketplaces. A selection:
| Platform | Number of companies | Purchaser fees | Languages |
|---|---|---|---|
| Platform | Number of companies 253 |
Purchaser fees None |
Languages DE, FR, IT, EN |
| Platform | Number of companies 438 |
Purchaser fees None |
Languages DE, FR |
| Platform | Number of companies 50 |
Purchaser fees None |
Languages DE, EN |
| Platform | Number of companies 150 |
Purchaser fees n/a |
Languages DE, FR |
| Platform | Number of companies 98 |
Purchaser fees None |
Languages DE, FR |
| Platform | Number of companies 78 |
Purchaser fees None |
Languages DE |
| Platform | Number of companies 6 |
Purchaser fees None |
Languages DE |
| Platform | Number of companies 12 |
Purchaser fees None |
Languages DE |
| Platform | Number of companies 26 |
Purchaser fees n/a |
Languages DE |
| Platform | Number of companies 7 |
Purchaser fees n/a |
Languages DE |
| Platform | Number of companies 178 |
Purchaser fees None |
Languages DE |
Information up to date as at: 7 September 2023
The purchase price for the company depends on supply and demand and is ultimately a matter of negotiation. Important: the offer becomes binding only when you sign the contract of sale.
Tip: look only at companies with values that you can identify with.
Useful information: the legal form is decisive for the acquisition
When purchasing companies with the form Ltd or LLC (limited company or limited liability company), the shares or capital contributions of the company are purchased. In the event of a share deal of this kind, all assets, liabilities, contracts and obligations are transferred to the purchaser. In the case of sole proprietorships and partnerships, however, only the assets (asset deal) can be acquired. This usually takes the form of a simple cash transfer. Acquiring a company as a private individual results in a double tax burden. It may therefore make sense to use a holding company (purchasing company ).
Corporate financing – capital for the purchase of a company
Financing the company acquisition is usually a challenge. Few purchasers can raise the purchase price entirely from their own resources. As a rule, the purchase is therefore financed with equity and debt capital. If you want to buy an existing company, you should think about possible sources of financing early on.
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Check whether you have sufficient savings to provide the equity capital, or whether you can raise other sources of funds, such as through an advance against inheritance, pension fund capital or an additional mortgage. Bank financing usually requires that you provide equity capital of 20% to 30% of the purchase price for the company purchase. If you do not have sufficient financial resources for bank financing, discuss your options with family and friends. Further options include:
Agreement with the seller
To make the succession easier, the sellers sell only a portion of the company shares. As a result, the company’s purchaser does not have to pay the full amount at once. This approach delays the acquisition process and means that the sellers retain control of the company for some time.
Involvement of management and staff
A company acquisition provides the opportunity for management and employees to share in the assets or profits, for example. They could also be offered shares in the company. However, those participating in such an offer usually also have a say in the company. In any case, potential investors must be clear that there is no guarantee of success and that, in the worst case, the capital they have contributed may be lost.
Money from third parties
Investors can contribute additional required equity capital. Venture capital companies (private equity funds) are unlikely to be an option for SMEs, but you could investigate crowd investing platforms or business angels, which bring in not only money but also expertise.
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Various financing options are suitable for debt capital – above all bank loans. Financial institutions will usually finance between 40% and 60% of the purchase price. Decisive factors for the loan amount include the industry, required investments and expected profits. Read up on interest rates and terms of repayment at an early stage. The general rule is that debt financing bears interest and is repaid within four to six years. Further financing forms include:
Sellers as investors
With a seller loan, the sellers of the company enable purchasers to pay the purchase price in instalments. The loan is secondary to bank financing. This means that investors cannot assert claims as long as the bank loan exists, which gives the purchaser financing security.
Surety bond cooperatives
In Switzerland, surety bond cooperatives help to cover any financing gaps. They are supported by the federal government and make it easier for efficient and viable SMEs to take out bank loans.
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Mezzanine capital is a mixture of equity and debt capital. Legally, it counts as debt capital. Examples are bonds and convertible bonds or loans with profit participation . Strictly speaking, seller loans also count as mezzanine financing.
Mezzanine capital
- Can close financing gaps
- Helps to improve balance sheet structure and creditworthiness
- Provides tax-deductible interest
- Allows for flexible remuneration
- Limits investors’ right of involvement
Compared to pure equity capital, however, the capital is time limited, and costs are higher than for classic loan financing. In addition to typical collateral, investors often demand additional restrictions, such as on wages or investments, and a highly scalable business model.
Useful information: how PostFinance supports you while purchasing a company
Through the LEND company loan, PostFinance offers a digital alternative to bank loans. The credit marketplace brings borrowers and investors together and enables credit decisions to be made within 48 hours, provided the company
- has been operating for at least two years,
- is entered in the Swiss commercial register,
- has annual revenue of at least 150,000 francs,
- and can guarantee that the majority of assets and production are located in Switzerland or Liechtenstein.
