Bringing investors into the company's capital is, for many Portuguese businesses, the step that makes it possible to fund growth, enter new markets, strengthen the management team or give founding shareholders partial liquidity. It is also one of the most demanding transactions in the life of a company: whoever comes in acquires rights, and those who remain begin sharing decisions they once took alone.
Experience shows that the difference between a balanced process and a bruising negotiation rarely lies with the investor. It lies in the preparation. Companies that come to the table with reliable accounts, clear governance and realistic expectations about their own valuation negotiate on better terms, with fewer surprises in due diligence and over a shorter timeframe.
This article walks through the essential stages of the process: investor profiles, the company's internal preparation, the logic of valuation and dilution, the term sheet and the shareholders' agreement, and the most frequent mistakes in negotiation.
Types of Investor: Who Might Take a Stake
Not all capital is equal. Before opening conversations, it is worth understanding which investor profile suits the company's stage and ambition:
- Business angels: individual investors writing smaller cheques, typical of early stages. Beyond capital, they bring management experience and a network of contacts.
- Venture capital: funds geared towards accelerated growth, with demanding metrics and a defined exit horizon, generally between five and ten years.
- Private equity: aimed at mature companies with stable cash flow. Larger transactions and greater involvement in management.
- Strategic investors: companies in the sector seeking industrial or commercial synergies. They may pay more, but they call for particular care around competition and dependency issues.
- Family offices: typically patient capital, with longer horizons and less pressure on the exit.
Each profile brings with it a distinct investment horizon, return expectation and degree of involvement. Choosing the wrong partner, however attractive the valuation, is a decision a company pays for over years.
Preparing Your Company for New Investors
Preparation begins long before the first contact. Three fronts deserve priority.
Reliable Accounts and Management Reporting
Above all else, the investor is buying confidence in the numbers. That requires accounts that are organised and consistent across financial years, ideally with statutory audit certification, and management reporting that allows the business to be read: margins by line of activity, cash-flow trends, the customer portfolio. It is also the moment to normalise earnings, stripping out costs that do not belong to the business, and to explain the extraordinary items that due diligence will inevitably question.
Governance and Corporate Structure
Articles of association up to date, minutes in order, unambiguous ownership of quotas (the units of ownership in a Portuguese private limited company) or shares, and shareholder loans and contracts between the company and its shareholders properly documented. The Código das Sociedades Comerciais — Portugal's Companies Code — sets the framework for capital increases and the transfer of shareholdings, and any corporate irregularity accumulated over the years tends to surface at the worst possible moment: mid-negotiation. In some cases a prior reorganisation is warranted — for instance, carving out non-operating assets such as property, or grouping shareholdings within an SGPS (a Portuguese holding company) — so that the investor enters only the perimeter that matters.
Dataroom and Due Diligence
A well-organised dataroom, covering key contracts, licences, intellectual property, staffing and any litigation, conveys professionalism and shaves weeks off the process. More importantly, it allows the company to identify and fix weaknesses before the investor finds them and uses them to argue the price down.
Valuation and Dilution: What Is Really at Stake
The whole negotiation turns on two numbers: the company's valuation before the capital comes in (pre-money) and after it (post-money). That relationship determines the percentage the investor receives and the dilution the current shareholders accept. It is worth distinguishing entry via a capital increase, where the money stays in the company to fund the plan, from the sale of existing shareholdings, where the proceeds go to the shareholders. These are transactions with different logics and distinct tax implications for the company and for the holders of the stakes, and they should be analysed case by case with specialist support.
Dilution, in itself, is not the enemy. Holding a smaller percentage of a substantially larger company can be an excellent outcome. What demands rigour is the basis for the valuation: a number without a defensible method weakens the entire negotiation.
From Term Sheet to Shareholders' Agreement
The term sheet sets out the essential terms of the transaction: amount, valuation, structure, conditions of entry and the investor's principal rights. On most points it is non-binding, with the usual exceptions of exclusivity and confidentiality, but it would be a mistake to treat it as a formality. What is conceded there is rarely clawed back in the definitive contracts.
The shareholders' agreement is the document that governs life together after the capital comes in: reserved matters requiring qualified approval, pre-emption rights on the transfer of shareholdings, tag-along and drag-along rights in a future sale, dividend policy, deadlock-resolution mechanisms and exit rules.
A well-constructed shareholders' agreement is not a sign of mistrust between shareholders: it is the map that prevents conflict on the day their interests diverge.
Mistakes to Avoid in the Negotiation
Certain mistakes recur with remarkable regularity in the transactions we advise on:
- Negotiating with a single investor, with no credible alternative, and surrendering all negotiating leverage.
- Presenting a valuation with no method behind it to withstand the investor's scrutiny.
- Accepting reserved matters so broad that they paralyse the day-to-day running of the company.
- Underestimating liquidation preference and drag-along clauses, whose effect is only felt years later, at the moment of sale.
- Starting the process with cash already under pressure, negotiating against the clock.
- Leaving the shareholders' agreement until the end, as a legal detail to be dealt with.
Prepare Today for Tomorrow's Deal
Opening up the company's capital is rarely an isolated decision. It forms part of a broader reflection on the future of the business and its shareholders, one that often intersects with planning the handover to the next generation. If that is your horizon, discover our work on the Business Succession page.
At Ravina Promissora, we support business owners in preparing investor entry transactions: we help get the accounts and the dataroom ready, and we guide the corporate structuring and the negotiation of the term sheet and the shareholders' agreement, in step with the legal and tax dimensions of each case. If you are weighing up this step, speak to us through our contact page.