In this interview, Zakaria Fahim, a chartered accountant and specialist in supporting family businesses, Managing Partner at BDO, discusses the ins and outs of business transfers.

Question: What can the new Investment Charter bring to improve business transfers in Morocco?

Zakaria Fahim: The new charter must incorporate measures to overcome the obstacles hindering business transfers in Morocco:

• Insufficient fiscal measures.
• Absence of a legal framework governing transfer operations in Morocco.
• Lack of founder support: fear of opening up capital to finance the transfer project.
• Absence of alternative financing such as crowdfunding and business angels. Additionally, the financing rate for transfers is similar to personal loan rates rather than investment loan rates.

Indeed, the absence of a specific framework, especially fiscal, often discourages business owners and impedes transfer operations in a broad sense. Currently, no fiscal benefits are in place to encourage non-family transfers of businesses.

Morocco is working on a multi-year strategy to improve the business climate from 2020 to 2025, aiming to facilitate the transfer of family businesses and further motivate founders to prepare for succession by engaging experts. Transferring a business is a profession, and the business owner is not the best-suited individual for this task.

As a great coach once said to a group of executives, if there's someone missing from this room, it's you yourselves.

Morocco needs a comprehensive and ambitious strategy this year to support its aspiration to become the African hub.

Our stated objective of integrating into the top 50 best economies in the world in terms of business climate quality by 2021 requires developing synergies and working as a team.

The focus will be on promoting the best international business practices, such as streamlining and digitizing administrative procedures, modernizing legal and legislative frameworks for businesses, establishing single-window services, and enhancing their offerings.

In detail, the committee will ensure the implementation of reforms outlined in Book V of the Commercial Code related to business recovery by adopting regulations concerning trustees and digitizing administrative procedures.

Efforts will also be made to digitize services related to property transfers, foreign trade documents and procedures, as well as implementing electronic business registration and digitizing municipal services. This approach will increasingly encourage buyers to navigate paperwork challenges and focus on the practical aspects of the transfer project.

In 2019, the reform of Regional Investment Centers (CRI) will also be implemented.

Therefore, the new investment charter, which will be announced soon, will provide an incentivizing legal framework for investment through simplified measures aimed at improving the business environment, enhancing the attractiveness and competitiveness of the Kingdom, and supporting sectoral strategies.

All of this emphasizes the need to act here and now for the "family business" soldier, a key to the success of all socio-economic policies of the country.

Challenge: Should financing tools (LBO credit, equity participation guarantees, etc.) be improved to facilitate business transmission/resale?

For the seller, it is mainly the abandonment of a structure to which they have been attached their whole life that poses an obstacle. For the buyer, financing the transmission is the major concern. Fifty percent of sellers have already been approached for the purchase of their business, but the financing cost is often prohibitive.

The buyer does not always have the necessary funds to complete the transaction and is often compelled to proceed with a leveraged acquisition.

"The financing rate must be comparable to that of an investment loan and not a personal loan." Despite the variety of financing sources, Morocco is exploring several avenues to improve the ecosystem of transmission financing.

It is important to accelerate the development of alternative financing such as business angels and crowdfunding, which can be faster and more suitable in certain cases.

Furthermore, due to the perceived deficiency and inadequacy of statistics on takeover financing, there is an argument for implementing a comprehensive dashboard to track all financing dedicated to transmissions. This would provide better insight into financing conditions by category and size of businesses, by sector, and by type of buyers. Notably, this includes the financing lines dedicated to transmission from the CCG (Central Guarantee Fund).

To better assess and value the business being sold, it is essential for sellers to engage specialists in takeover financing and tax advisory services.

Regarding the actual sale price, the report recommends avoiding too heavy a debt service burden compared to the company's profitability. Project balance is achieved through a larger personal contribution or a lower sale price.

Unfortunately, banks often encounter cases where dividend returns necessary for senior debt repayment overly impact the target structure and reduce its financial means.

All buyers are advised to be accompanied by one or more specialists with expertise in transmission: chartered accountants, support networks, or specialized firms. The financing preparation process takes time, and between the moment a buyer meets their banker and when funds are disbursed, several months can elapse. The preparation and assembly time for financing documents, especially involving multiple parties (co-financiers, guarantors, etc.), should not be underestimated by the buyer.