For most business owners, selling a company is a decision taken once in a lifetime. Selling a company is a structured process, with distinct stages, long timelines and rules that are worth understanding before the first approach to a potential buyer. Owners who come to market unprepared negotiate at a disadvantage, and that disadvantage almost always shows in the final price.
In Portugal, a typical transaction runs for six to twelve months, sometimes longer, and cuts across matters as varied as financial valuation, company law, taxation and negotiation. This guide walks through the stages of the process, from preparation to completion, and identifies the factors that create value and the mistakes that destroy it.
At Ravina Promissora we advise business owners in the Leiria region and across the country on the purchase and sale of shareholdings. Experience shows that the most successful transactions begin long before there is a buyer at the table.
Preparation: Where the Sale of a Company Is Won
Ideally, preparation begins twelve to twenty-four months before the company goes to market. This is the period in which financial information is put in order, dependence on the founder is reduced and everything a discerning buyer will question is resolved with time to spare.
Reliable, up-to-date accounts, written contracts with customers and suppliers, a clean record with the tax authority and social security, and a management team able to operate without the owner are the foundations of any sound transaction. On the corporate side, it is important to review the articles of association, clarify the ownership of quotas (the ownership units of a Portuguese private limited company) or shares, and check for any shareholders' agreements that may restrict the transfer. In groups with several companies, a holding structure such as an SGPS (the Portuguese holding company vehicle) can simplify the transaction, but its tax treatment must be assessed case by case.
Valuation and the Information Memorandum
What the Company Is Worth
Valuation typically combines market-based methods, such as EBITDA multiples observed in comparable transactions, with income-based methods, such as discounting future cash flows. The result is not a precise figure: it is a value range that serves as a reference point for negotiation. A professional valuation also anticipates the adjustments a buyer will propose, from net debt to working capital requirements and overdue investment.
The Information Memorandum
Once the value range is defined, the information memorandum is prepared — the document that presents the company to potential buyers: its history, market, competitive advantages, financial information and outlook. An anonymised teaser usually circulates before the memorandum, generating interest without revealing the company's identity. Confidentiality is protected through agreements signed before any sensitive information changes hands.
Finding Buyers and Negotiating
Buyers generally fall into two broad groups: strategic buyers, such as competitors, customers or suppliers seeking synergies, and financial buyers, such as investment funds or private investors seeking a return. Each profile values different aspects of the business and calls for a distinct negotiating approach.
Contact is made discreetly and in stages. Of the interested parties who sign the confidentiality agreement and receive the memorandum, some will submit non-binding letters of intent, indicating price and conditions. Negotiation of the key terms follows and, frequently, the chosen buyer is granted a period of exclusivity.
A company is worth more when it does not need to be sold. Timely preparation turns the sale from an act of necessity into an act of choice.
Due Diligence and the Sale and Purchase Agreement
Due diligence is the buyer's audit of the company: financial, tax, legal, employment and, increasingly, technological. It takes place in an organised document-sharing environment and can run for several weeks. Its findings feed directly into the price and the warranties demanded; surprises at this stage are the leading cause of renegotiations and failed transactions.
Once due diligence is cleared, the share purchase agreement is negotiated, governed by the Código das Sociedades Comerciais (the Portuguese Companies Code) and the general law of contract. This is the document that sets out the seller's representations and warranties, the price adjustment mechanisms, any deferred or earn-out components linked to future results, and the non-compete clauses. At completion, once the agreed conditions have been satisfied, the quotas or shares are transferred and payment is made.
The tax treatment of capital gains depends on the structure of the transaction and the seller's specific circumstances, whether an individual or a company. The differences can be significant, so the structure of the sale should be analysed case by case, with specialist support, before any commitment is signed.
What Builds Value and What Destroys It
Certain patterns repeat themselves in sale transactions. A business gains value from:
- Recurring, predictable results and a diversified customer base;
- An autonomous management team that stays on after the founder's departure;
- Formalised contracts and properly protected intellectual property;
- Clear, auditable financial information with no hidden liabilities;
- Demonstrable growth and a credible plan to sustain it.
By contrast, value is destroyed by excessive dependence on the owner or on a single customer, pending litigation, opaque accounting, personal assets mixed with those of the company and, above all, haste. A seller in a hurry always negotiates on worse terms.
Sell or Pass On: The Next Step
Selling is not the only way to hand over the reins. For many business owners, the right answer lies in a transition to the next generation, using instruments such as the gift of shareholdings with a reserved usufruct (a retained right of use and income) or a family protocol. If you are weighing up the future of your business, visit our Business Succession page and compare the routes available.
At Ravina Promissora we support business owners at every stage of the process: preparation, valuation, negotiation and completion. If you would like to discuss the sale of your company in complete confidence, get in touch through our contact page.