Paperjam met in November 2024 with an entrepreneur-seller, a multi-family office, a fund buying SMEs and a small and a large M&A firm. In a series of interviews, they shared their insights on how to ensure successful transmission of companies for everyone involved in the process. All are based in Luxembourg. Pictured: Joubin Bashiri (Tenzing Partners), Gregoire d’Avout (EY), Georges Zahlen (Axiomatic) and Christophe Bianco (Thales). Photos: Tenzing Partners, EY, Axiomatic and Simon Verjus. Montage: Maison Moderne

Paperjam met in November 2024 with an entrepreneur-seller, a multi-family office, a fund buying SMEs and a small and a large M&A firm. In a series of interviews, they shared their insights on how to ensure successful transmission of companies for everyone involved in the process. All are based in Luxembourg. Pictured: Joubin Bashiri (Tenzing Partners), Gregoire d’Avout (EY), Georges Zahlen (Axiomatic) and Christophe Bianco (Thales). Photos: Tenzing Partners, EY, Axiomatic and Simon Verjus. Montage: Maison Moderne

In the first instalment of an eight-part series, local players involved in the transmission of SMEs told Paperjam about the preparation and thought process that occurs before an entrepreneur selects their partners and advisors for this often once-in-a-lifetime transaction.

“Our business in Luxembourg over the last 17 years has been to accompany entrepreneurs in their strategic transition phases, including the sale of their firm, one of their most important decisions,” said Joubin Bashiri, partner at Tenzing Partners.

Georges Zahlen, CEO at Axiomatic, noted that the cash element for the entrepreneur is an important element in the transaction but they are “just very happy when they know that their employees have found a new home... especially in very small companies.”

Bashiri and Zahlen explained that these entrepreneurs have high emotional attachment to the firm they have built over 20 to 30 years and sometimes even spanning over several generations. “This is an aspect we should not under-estimated... we do not manage numbers but a human relationship,” commented Bashiri. Zahlen added: “we are a safe haven for SMEs... It is their baby and they want to make sure that it grows with us.”

Bashiri spends several meetings with a seller to understand their wishes for the future of their business. For instance, the seller may have targeted a potential buyer, or he may consider an in-house manager as an appropriate acquirer that may need financial support. Not surprisingly, the structure of the transaction will therefore depend on the unique context of each transmission.

Prepare--well--in advance to ensure a successful transition

Bashiri noted that dramatic outcomes may occur when an entrepreneur transfers their firm to a child that mismanaged the firm. The original owner may be called back to duty, sometimes at 80 years of age, in a different market context resulting in the bankruptcy of the company.

Consequently, Bashiri noted that the thought process about transmission starts even earlier than in the past, sometimes as early as five years before the retirement of the entrepreneur. The thought process includes matters such as the continuity of the firm, the ideal offtaker or even a ban of a sale to a hated competitor. He thinks that this upstream reflection helps a smooth and successful transmission that takes generally around 12 months from the formal obtention of the mandate to the closing.

For an entrepreneur, the shorter, the better it is
Christophe Bianco

Christophe Bianco, head of sales & bids, cyber digital solutions business line, Thales

The upstream time horizon for Gregoire d’Avout, partner, strategy and transactions at EY, stands between 12 and 24 months, while the duration of the transaction process runs for around seven to nine months from the initial preparation until completing the deal. “There’s just too much uncertainty to start discussion as early as five years upstream.”

At the cybersecurity services firm Excellium, the preparation to the closing of the transaction lasted only six months. “It took such a long time!” remarked Christophe Bianco, head of sales & bids, cyber digital solutions business line at Thales, when he and his partners sold Excellium to Thales in 2022. It took longer for us than for firms in similar businesses “because we are regulated by the CSSF [the Financial Sector Supervisory Commission].” He explained that during that period, you could hardly talk with the buyer about current activities without the presence of lawyers. “For an entrepreneur, the shorter, the better it is.”

Yet Bianco explained that the thought process started four years before the exit and involved a successful collaboration with a corporate venture capitalist. However, he warned that whether it is a business angel or VC, they all have financial expectations that must be well understood by the entrepreneur. “A failure to understand their objectives [such as exit timing and minimal exit price, etc] will run against you.”

How do we understand each other?

In a “madness moment,” Bianco decided to go back to school to study entrepreneurship and M&A “just to understand the questions” of the VC, to be fully aligned with the interest of the majority owner.

Better equipped, Bianco could then fully understand the roles of everyone. “The corporate VC wanted to maximise financially the exit; [the investment bank] Stifet was paid upon the end result, whereas we were focused on maximising the transition” in the enlarged firm.

Related articles