Transfer of goodwill

The steps leading to the sale of the business are as follows.

Appreciation of the value of the fund
Initially, and in order to enter into possible negotiations with a buyer, it will be necessary to determine the value of the goodwill, which will be used to determine the presentation price and negotiate it. Many evaluation methods exist, we will only briefly explain the most common ones here.

Scale

method
This is to apply a percentage to the average turnover generated by the operation of the fund over a period of several years, from the scale published by Francis LEFEBVRE and which is applied and recognized by practitioners and courts. This percentage varies according to the activity carried out by the transferor.

Heritage

value
The goodwill is composed of different elements, tangible and intangible, which should be evaluated individually before adding the valuations made to determine the value of the fund. Tangible elements are the equipment necessary for the operation of the fund, commercial furniture, fittings and fixtures. The intangible elements are customer, lease right, trade name, patents and trademarks, and licenses. The value of the fund therefore excludes buildings, receivables and debts as well as the stock of goods, valued separately. Each element has a value, the sum of these values represents the patrimonial value of the business.

Return

value
The latter method will be based on the trade’s ability to generate profit, the valuation being based on the average net result of recent years to which a multiplier is applied. The multiplier varies by sector depending on the visibility and profitability of the companies involved.

Negotiation and agreement in principle on the price
Once the sale offer is published, potential buyers will come forward and the negotiation phase will open. It is advisable to have the purchaser sign a confidentiality agreement. By this document the two signatory parties undertake not to disclose any information on the assignment to third parties. If the transaction does not take place, the potential buyer must return the documents sent to the transferor.

Deed of Assignment
The contract of assignment is governed by the law of 17 March 1909. It includes a certain number of mandatory particulars (origin of ownership of the land, status of liens and pledge, turnover and results of the last 3 years, statement of the lease).

The seller is bound by the following obligations: obligation to issue, eviction guarantee, guarantee of hidden defects, endorsement and communication of the seller’s accounts, in addition to any conventional guarantees that the drafter of the deed may arrange.

The sale price of the land must be sequestered during the opposition period of the seller’s creditors and until the purge of each of the oppositions filed.

The deed of sale then gives rise to advertisements, which make the creditors’ opposition period run.