Graduate School of Management

1
Business Transmission 2023
EIPB – GNEPB302
IAE-Nice|UNS

Graduate School of Management

 MA Philosophy (TU)
Leen de Waal, MSc Business Economics (EUR);
MA. MSc.

18 yrs Financal Mngmt:

McKinsey&Co, KPMG, BBDO, etc.;

Strategy
21 yrs of Lecturing Innovation

& Consulting in: Entrepreneurship

Exits/M&A/Transmissions

Graduate School of Management

 Understanding business transmission both from
investing/acquisition and divesting perspective.

Preparing and Managing a successful business

transmission from both owner/buyer perspective.

Course Being able to identify major business transmission

opportunities & issues from the owner's perspective.

Goals &
Objectives
Capturing and Sustaining or Leveraging value
(creation) through (successful) business transmission.

Transaction management for business transmission.

Preparing for exit-strategies right from the inception of

a (new) business.

Graduate School of Management

Course overview…

Introduction Planning & Valuation Transaction Post-

• What is it? Preparation • Financial Management Transaction
• Context • When? methods • Managing the • Post-
• Importance? • How/What • Maximizing actual transaction Entrepreneur-
Steps? value ship Life
• Who to involve

Graduate School of Management

 Attendance: 15%

Participation 10%
Assessments…
Group (3/4 pers.) work during class: 25%
èPresentations & questions & discussion:
Thursday Feb 16, 2023 – 08:30-12:30

Formal written Assessment 50%

èTuesday Feb 16, 2023 – 13:30-17:30

Graduate School of Management

Group assignment Feb 16th, 2023
• You’ll form working teams of 4-5 pers;
• Each team presents (pptx) their work, ±20-25mins;
• Discussion with other groups;
• All other groups each will pose two relevant questions;
• Supported working on assignment during lecture blocks

Graduate School of Management

Group Assignment – 1 - Situation
• Present your team as a group of representatives of a private
bank or consulting firm willing to acquire a new client;
• The client is a Family-SME-owner; who founded the business
15 years ago;
• Now the owner is ready for retirement.
• There are some family-members who could potentially enter
the business;
• The owner however wants to sell its business;

Graduate School of Management

Group – Assignment – 2 - Project
Explain to your prospective client what you think of the
situation, what would be the best option to proceed, and
especially why.
Next elaborate as to how and why which next steps should be
taken by the entrepreneur, and what assistance you can/will
offer.

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Business Transmission: Relevance?
• Impact on Society is huge:
• Large part (>75%) of SME business w-w is ‘family-run’;
• ±65% of all employment w-w is in SME’s;
• >65% of GNP in major economies is generated through SME’s;
• UK (2008) ±30% bankruptcies caused by failed transmissions;
• Creative Destruction or Growth?
• Preparation & Readiness preserves:
• Value;
• Assets;
• Jobs;
• …

Graduate School of Management

Entrepreneurial Value Creation…
• Why solving which problem? Customer Needs
• Why in which way; Solution
• Why for which client; Key Customer
• The answers to these ‘why’-questions create: Value Proposition

To complete the strategy we need: Business Model

• Assets (Material & Immaterial)
• Organisation Governance
• Finance
• Where Got: EV & VVàWACC
EVA & Working Capital
• Where Gone: P&LàROI
• External – Interface - Internal
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He who fails to plan,
is planning to fail!
Sir Winston Churchill

* With careful and detailed planning, one can win; with careless and less detailed
planning, one cannot win How much more certain is defeat if one does not plan at
all! From the way planning is done beforehand, we can predict victory or defeat.ʼ
Sun Tzu, The Art of War (±400 b.C.)

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Creating Value Makes the World go round…

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Understanding Value, Economic perspective…

• Value => Scarcity expressed in monetary terms

• Scarcity => Tension between:
• Limited(?) Resources
• Infinite Needs
• Needs are subjective, therefore scarcity, and value
are too!
Subjectivity implies:
• Context -dependent;
• Relative to place and time.

• But… Do not despair, there is hope!

Our Creative Powers are subjective too, and thus can
generate infinite options at creating value!!

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Value Proposition…
• If Value is Subjective…

• …it is imperative to know/choose FOR WHOM you

want to realize it;

• which necessarily implies recognizing, as objective as

possible, the NEEDS of that person/group/segment
(archetype with attributes);

• and the WAY/HOW this person preferably

((un)consciously) wants its needs to be fulfilled.

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 Utility: Valuation/monetization of Promises

Quality: Extent of fulfilling specs, Promise vs. Realisation

Cost: Value of Unavoidably(! If not: spillage/waste)

Utility, Sacrificed Resources

Quality & Critical Succes Factors (CSF)

Costs… Critical Performance Indicators (CPI)

Utility Gap (Desire <-> Promise)

Quality Gap (Promise <-> Realisation)

Graduate School of Management

Stakeholders, Mitchell et. al. 1997
Macht: option to impose ‘will’
Coercive/Utilitarian/Normative
Legitimiteit: Desirable Actions
Individual/Organisation/Society
Urgency: claim for immediate action
4. dominant
Time for action/critical relation Power
(1. dormant)

7. definitive

5. dangerous Urgence Legitimacy

(3. deman- (2. discre-
ding) tionary)

1-3 : latent stakeholders

4-6 : expectant stakeholders
7 : definitive 6. dependent

8. non-stakeholder Graduate School of Management

 • For All (!) Stakeholders
• Entrepreneur
• Investor/Buyer
• Clients
Business • Suppliers
transmission • Employees
• Etc…
should create • By preserving (or creating)
Value… • Value
• Wealth/Capital
• Returns

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From: Start-up à Grow-up à Business Transmission:
Start planning at the inception of your business!

Creating,
building & Planning the Transaction
Running the Exit… Management
Business
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Business Transmission: When/Why, Who?
Different Games; different rules…

External/New
End-of-Life;
New-Phaseà
Exit à3rd
3rd
party/
party/investor
investor
Involvement
Internal/Existing

End-of-Life; New-Phase à
Exit à MBO, MBO,
Family/Heirs Family/Heirs

When/Why
Finalization Phase Optimization
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Considerations - 1
(when planning to exit…)
• Exit-timing, based on:
• Macro/Sector-economic Cycle;
• Life cycle of the business.
• Effect on:
• Employees;
• Customers;
• Business Partners.
• Post-transmission Capital - Investments - Earnings?
• Pension/Medical;
• Life-style.
• Post-Exit/Transmission Life – Meaningfulness?

Graduate School of Management

Considerations - 2
(when planning to exit…)
• How to Exit, available options?
• Sale;
• Stock-Exchange Listing;
• Management Buy-Out;
• Next Generation transfer.
• Confidentiality during business transmission;
• Tax Optimization/Minimization;
• Business Continuation & supporting your former business?
• Transmission management & support by external advisors/consultants.

Graduate School of Management

Being an Entrepreneur…

…while building your business always ask yourself…

…does every step I take, every move I make…
…add value to the business in the long run…
…if I were to evaluate this enterprise…
…from an investor’s perspective?

Be aware that running your business as an entrepreneur

and the subsequent business transmission are inextricably
connected to each other!!
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Antifragility…
Foundations of Strategic Thinking

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 How to Love the Wind…

Wind extinguishes a candle We just don’t want to just We want to survive

and energizes a fire.
Likewise with randomness,
uncertainty, chaos: you want
to use them, not hide from
them. You want to be the fire
and wish for the wind […]
survive uncertainty, to just uncertainty and, in addition
about make it. […] have the last word. The
mission is how to
domesticate, even dominate,
even conquer, the unseen,
the opaque, the inexplicable.

Nassim Nicholas Taleb, Antifragile – Things That Gain from Disorder (prologue) Graduate School of Management
 AntiFragility…

Fragile AntiFragile Robust

Will break in any Stress- Grows, gets better, stronger Solid, Strong, withstands
situation. more sustainable through known dangers; motionless;
unpredictable, unforeseen Breaks down due to
events. unforeseen Stress situations.

Graduate School of Management

 Antifragility; examples…

Riots Love Information

The harder you fight and Forbidden? Forbidden books are the most
punish them, the “Playing hard to get”? interesting thing there is.
stronger/bigger the movement Will only make it grow more!
becomes… Eg. Romeo & Julia…

Graduate School of Management

 Elements of Antifragility

Black Swans; Skin in the Game; Fragilistas; Hormesis (stressors);

Turkeys Upside risk? But also(!) Risk Management; Overcompensation
& accept Downside risk; Organism as Machine; Muscles/Bones;
Inverted Turkeys; Agency -> Fragility; Vaccines/ Homeopathie;
Procrustes’ Approach;
Moral Hazard; Controllable, predictable Universal Acid: ‘what
Doxastic Commitment world... doesn’t kill me, kills the
(soul in the game); competition!

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“The funding we are asking for is needed to keep strengthening our capacity here at home so
Antifragiliteit in systemen…
we can respond to any future Ebola cases. It is needed to help us partner with other
countries to prevent and deal with future outbreaks and threats before they become
epidemics.
We were lucky with H1N1 that it did not prove to be more deadly. We can’t say we are lucky
with Ebola because obviously it’s having a devastating effect in West-Africa but it is not
airborne in its transmission.
There may and most likely will come a time in which we have likely both an airborne disease
that is deadly. And in order for us to deal with that effectively, we have to put in place an
infrastructure – not just here at home but globally – that allows us to see it see it quickly,
isolate it quickly, respond to it quickly.
“So that if and when a new strain of flu like the Spanish flu, crops up five years from now, or
a decade from now, we’ve made the investment and we are further along to be able to catch
it. It is a smart investment for us to make.”
Barack Obama in 2014

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Stelling…

The essence of strategic

action is to make (the
people in) the organization
(collectively) more anti-
fragile

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Entrepreneurship

• Connecting link between:

• Resources;
• Needs.
• Industry-independent; not necessarily
profit-driven.
(also: Government, Policymakers, Back-
office. etc.)
• Value Creation: reciprocally recognizing
humans:
• Imagination/Inspiration;
• Perspectives;
• Activation;
• Realization.

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6. SUPPLIERS 7. LOCATIONS 2. VALUE 3.1. RELATIONS 1. CLIENTS,
PROPOSITION BENEFICIARIES
& NEEDS

Attention:
5. KEY PROCESSES: * Coherence,
Logic,
Patterns.
3.2. CHANNELS * Everything works
8. ORGANIZATION 9. INFORMATION in the same
Direction?
* How new is
your BusMod?
• What does Bus.
Model for
MANAGEMENT SYSTEM/GOVERNANCE
add customer?

Based on: Campbell/Guiterrez-Operating Model Canvas; Osterwalder & Peigneur-Business Model Canvas
Graduate School of Management
 Business Model: checklist
1. Describe the three most important attributes of your core customer's need (who is that?)
2. In (max!) five words, what does your value proposition for that core customer consist of?
3. In one word:
1. The relevant nature of the relationship with the core customer;
2. The most important channel to 'bring' your value proposition to the core customer.
4. Describe in max (!) three sentences the logical connection between points 1-3
5. In max(!) 5 words the most important activity(ies)/process(s) to realize the value proposition;
6. Who are the most important (maximum three) partners/suppliers in this regard;
7. Describe the nature and/or location of the location(s) in max(!) five words;
8. Name the essence(s) of the organizational form;
9. What are the most important information flows/control variables, name CSFs & KPIs (max(!) 5)
10. Describe in three sentences the logical connection between points 5-9
11. Describe the most logical income stream(s) (max. 3) based on question 4.
12. Describe the most important cost drivers on the basis of question 10.
13. Are steps 11 & 12 in balance? If not, step 4 & 10 again…

Graduate School of Management