3 March · three weeks of six are spent
He is reading the letter of intent for the sixth time. His accountant tells him the price is fair. His lawyer tells him the shareholders' agreement is standard. His bank tells him it would follow with debt as well. Everyone answers the question he is asking — and no one answers the one he has yet to put into words.
An illustrative situation, drawn from real ones. The companies, the people, the figures and the facts presented here are fictional and composite: they designate no existing organisation and no existing person. The method is the one we apply. This dossier is a demonstration — it reports no engagement result.
Declared door — Leaders · The investigation of a decision
An unfolded document, alone at the centre of a bare table, under a single lamp.
What is being decided, in how much time, and why three competent opinions did not help.
Investigation of the decision to open the capital — Laboratoires Valcourt
What is actually being decided, the four courses that are open, what each one costs, and the fact that is missing before you can settle it.
- Commissioned by
- Bertrand Ferrandis, chairman and 91% shareholder.
- Decision investigated
- The response to Arète Capital's letter of intent of 10 February.
- What this is
- The investigation of your decision: what it commits, the courses genuinely open, and the price of each.
- Why now
- Twelve days separate you from the exclusivity deadline. Two of the four courses set out here remain accessible only while it is still running.
- What you do with it
- Settle the matter — and, should you choose to settle it later, know exactly what that delay costs and how to obtain it.
- Time
- Reading: 18 minutes · the essentials: 1 minute · the exhibits: on request.
The essentials
- The valuation on the table is not the subject. At 8.0 times 2025 EBITDA, it sits inside the range of comparable transactions in the sector. The question that decides your next ten years lies elsewhere: in the order of operations.
- The round, as it is structured, funds something other than what needs funding. Of the €9.6M represented by the sale of 45%, €3.0M enters the company and €6.6M comes to you personally. The programme that would move your company into another category of value costs €4.2M.
- A single figure caps your value today: 38.2%. That is the share of your largest customer. No acquirer pays the multiple of growth when six months' notice can erase a third of revenue. The corresponding discount is estimated at between 1.5 and 2.5 times EBITDA.
- Hence the loop: opening now means selling at the multiple of an untreated risk; treating the risk takes eighteen months and money; and money is precisely what the opening brings. This loop is real. It has an exit, and that exit lies somewhere other than in the choice between yes and no.
- Four courses are open, one of which the letter of intent leaves unmentioned. Each is investigated with its cost and with what would have to be true for it to be the right one.
- The fact that would settle it lies outside the dossier, and it is within reach. Your largest customer's intention over three years is established by no document. It can be established in April, at a contractual meeting that already exists — three weeks after the date on which you are asked to answer. The first move this dossier recommends is therefore not an answer: it is a request for more time.
How to read this dossier
To investigate a decision is not to produce an opinion. It is to answer five questions, in this order — and the order is the method:
- 01
- What is actually being decided? Rarely the thing that is asked: here you are asked to answer an offer, and what you commit is your personal wealth, your tempo and the value of what you will keep. § 03.
- 02
- Which clock? What bounds the decision, and what the calendar rules out. § 04.
- 03
- Which courses are effectively open? Including those that are not on the table. § 07.
- 04
- What does each one cost, and what would have to be true for it to be the right one? § 07 and § 08.
- 05
- What is missing before you can settle it, and how is it obtained? § 11.
It is this grid that produces the fourth course in § 07: a method that obliges you to look for the options no one has formulated ends up finding one. And it is the grid that produces the first move in § 09, by setting the fifth question against the second.
Every statement in this dossier carries its regime. Four grades, marked line by line:
- établi
- A dated primary source founds it — a contract, a ledger, a quotation.
- déclaré
- Someone said it or published it. We have not verified it, and we do not hold it as given.
- réserve
- An estimate, a calculation, a secondary source. Robust, unmeasured.
- non établi
- We did not find it. It is written down, and it is never filled in.
The rule that governs the other three: what is not established is never completed by a plausible inference. On this dossier that matters particularly — the most important fact sits at the fourth grade.
This dossier recommends none of the four courses. It investigates them. The choice rests on trade-offs that belong to you: your relationship to risk in your personal wealth, your own horizon, and what you want to do with the next ten years.
What you decide is not what you are asked to decide
You are asked to answer an offer. What you commit is another matter, and it has to be set down before anything else is examined.
You commit three things at once, and they have three different horizons. A share of your personal wealth — 91% of your assets sit today in this company, and you are fifty-four. Control of your company's tempo — a shareholders' agreement leaves you the majority; what it takes away is the freedom to decide the pace and the exit alone. And the value trajectory of the asset itself — that is, what the part you do not sell will be worth.
The three opinions you have received are sound, and none of them could help you, because each answered within its own discipline: the price is fair, says your accountant, and it is; the agreement is standard, says your lawyer, and it is; the bank would follow with debt, and it would. None of these three answers bears on the decision. That is the mark of questions of consequence: they fall in the blind spot of everyone who advises you well.
A decision that commits three things at three horizons has no right answer in itself. It has one for you, and that is why this dossier stops at the threshold: for each course, it states what would have to be true for that course to be the right one. Whether it is true, you alone can say.
The clock
- 10 February letter of intent, six weeks' exclusivity
- 12 March dossier delivered · twelve days remaining
- 24 March deadline
- Elapsed — three weeks of six
- Solid gold segment — the window in which a request for more time still reads as an ordinary act
- Hatched segment — beyond it, the calendar is no longer yours to choose, it is yours to endure
During April — the annual review of the largest customer's framework agreement, provided for by article 9 of the agreement of 14 April 2021 established. It falls outside the timeline, three weeks after the deadline for answering.
The deadline imposed on you falls three weeks before the one contractual meeting that would yield the missing fact. This is a coincidence of the calendar rather than a manoeuvre by the fund. It is a coincidence that costs dearly, and it can be corrected.
For the record — end of 2027: expiry of the finance lease on the current plant.
Three facts command everything else
Fact 1 — 38.2% of your revenue depends on a contract with no volume commitment
The largest customer represents €8.55M of €22.4M. The framework agreement of 14 April 2021 renews automatically, on six months' notice, with no volume commitment whatsoever.
established 2025 accounts receivable ledger; framework agreement of 14 April 2021, articles 3, 4 and 9. — What the exhibit does not establish: the customer's intention. A contract without a volume commitment says nothing about what will be ordered — in either direction.
The second customer weighs 11.3%, the third 6.9%, and the other forty-one 43.6%. The dependence is therefore singular rather than structural: your portfolio has a peak rather than a concentration.
Fact 2 — That peak costs, today, between 1.5 and 2.5 turns of multiple
Across nine comparable transactions reconstructed in cosmetic contract manufacturing and specialty pharmaceutical subcontracting between 2021 and 2025 — four of them at a public multiple — companies whose largest customer exceeded 30% of revenue traded between 1.5 and 2.5 times EBITDA below the others, at comparable size and growth. qualified
This discount rests on a mechanism every acquirer applies rather than on an opinion of the market: the acquirer is buying a flow of which a third can disappear on notice, and it rarely funds with debt what it cannot secure.
Fact 3 — The plant is saturated, and easing it costs €2.6M
Utilisation of the main line stands at 85% for 2025 established. The extension quoted by your supplier represents €2.6M, with eleven months to commissioning established — quotation of 8 January, valid for ninety days.
That means two things. First: your growth at 14% a year stops of its own accord in eighteen months if nothing is committed. Second, and less visible: you cannot take on the new customers who would diversify your revenue, for want of the capacity to serve them.
The loop
Assemble the three facts and you have the mechanism that closes around your decision — the one you see poorly because you are inside it.
The peak at 38.2% caps the company's value today. Bringing it down means winning new customers, which requires a sales force you do not have and production capacity you do not have either. Together they cost €4.2M — €2.6M of plant established, €0.9M of sales force over eighteen months and €0.7M of formulation and regulatory approval for the new ranges qualified. And €4.2M is precisely the order of magnitude for which one opens one's capital.
And this is where the structure of the offer changes the nature of the problem.
Shortfall against the funding of the programme: €1.2M.
Solid gold: what enters the company · slate: what goes out to the shareholder · hollow: what would have to be funded. — established letter of intent of 10 February, § 2 and § 3 · extension quotation of 8 January. — Mechanism: enterprise value €24.8M (8.0 × 2025 EBITDA of €3.1M) − net debt €3.4M = equity value €21.4M; 45% = €9.63M; primary / secondary split per § 3 of the letter.
The round therefore funds €3.0M of a programme that costs 4.2. The company comes out of the transaction with 45% of its capital sold and a programme funded to three quarters. This is an ordinary offer structure rather than a trap or an anomaly; no one pointed out to you that it fell short of your need, because no one had costed your need.
The four courses, what each one costs, what would have to be true for each to be the right one.
The four courses
Accept, on the terms of the letter
€6.63M of immediate personal liquidity, taking your wealth outside the company from €1.4M to €8.0M and lifting the concentration of your personal assets at fifty-four. A partner with means, with a network, and with the habit of value-creation plans.
You sell 45% at the multiple of an untreated risk — that is, if the estimate in fact 2 holds, between €4.7M and €7.8M of enterprise value left on the table qualified. You enter a shareholders' agreement at the moment your need to invest is greatest and your bargaining power least. And you enter a plan underfunded by €1.2M, which will resolve either through additional debt or through a downward adjustment to the programme — an adjustment that, either way, will no longer be yours alone.
Three cumulative conditions. That the diversification programme be written into the value-creation plan of the shareholders' agreement, with its budget and its calendar — rather than left to an annual arbitration. That the €1.2M balance be settled now in its principle and in its source, before signature. And that you have made the personal choice to bear the discount rather than the risk of the interval — which is perfectly defensible, provided it is done knowingly.
Defer by eighteen months, after diversification
You open on a cleaned-up base. If the programme delivers what your business plan projects — EBITDA at €4.0M, largest customer brought below 25% — the same sale of 45% is then worth between €14.5M and €16.3M against €9.63M today qualified. A difference of €5M to €7M in your pocket, eighteen months out.
Funding the interval, to be found without the round: your banks would follow for an additional €4.4M, taking borrowings to 2.5 times EBITDA qualified — a verbal, non-binding indication given on 6 March. Servicing that debt weighs on cash while the programme runs, that is, at the least comfortable moment. And you spend eighteen further months with 91% of your wealth in a single asset.
One condition, and it is a heavy one: that the largest customer stay through the interval. Should that customer leave in the twelfth month, EBITDA falls back to around €1.2M, equity value to around €6M to €8M, and this course will have cost most of what course A guaranteed qualified. That condition cannot be appraised as things stand: it is the named void of § 11.
Do not open the capital
Complete freedom over the tempo. The programme is funded by bank debt and internally generated cash, on a slower rhythm — twenty-eight to thirty-four months rather than eighteen, depending on how much cash comes up from the company.
A ceiling on ambition, accepted, and above all the persistence of concentration in your personal wealth. At fifty-four, with 91% of your wealth in an illiquid asset a third of whose flow rests on a contract with no volume commitment, the status quo is itself a risk position — it simply bears a name no one pronounces.
That the ceiling be an explicit choice of life — you want to run this company at your own pace and hand it on or sell later — rather than a deferred decision in disguise. This is the one course of the four where the principal risk is psychological rather than economic: it is rarely chosen, and often merely endured.
Separate what you are looking for from who can bring it to you
the one that is not in the letter
What you lack is not capital first of all, it is access to new customers. An upstream player — a formulator, a supplier of active ingredients — or a selective distributor brings exactly that resource, and often part of the capital with it. Five players matching this profile have been identified across France and Italy.
What it costs: a search of four to eight months, a negotiation more complex than with a financial buyer, and a risk of fresh dependence to be bounded contractually from the outset. What would have to be true: that at least one of these five players have a documented strategic interest in securing contract-manufacturing capacity — which can be verified in three weeks and has not been investigated, the exclusivity in force forbidding it.
You buy back part of your shares through an acquisition vehicle funded by acquisition debt. You obtain personal liquidity — of the order of €6M to €7M depending on the debt capacity retained — while keeping control of the tempo, and you open the capital in twenty-four months on a diversified base.
What it costs: the holding company's debt service, of the order of €0.75M a year, taken from the dividends flowed up — that is, from the cash that would otherwise fund the programme. You cannot take the liquidity and fund the diversification with the same euro; the trade-off is head-on and it has to be posed as such. What would have to be true: that personal liquidity be your first need, and that the programme make do with an intermediate rhythm.
The arithmetic, laid flat
| Immediate liquidity for you | Money entering the company | Capital sold | Value of your remaining 55% at 18-24 months | |
|---|---|---|---|---|
| A — accept | €6.63M | €3.0M | 45% | €11.8M to €13.2M qualified |
| B — defer | 0 | 0 (debt: €4.4M) | 0 today, 45% thereafter | €17.7M to €19.9M qualified |
| C — do not open | 0 | 0 (debt: €4.4M) | 0 | 100% of an asset on a slower trajectory |
| D2 — holding company | €6M to €7M | 0 | 0 | control kept, programme slowed |
Mechanism of the projections: EBITDA taken to €4.0M (business plan of 28 February, adjusted on two lines — § 11); a multiple of 9.5 to 10.5 in the absence of a concentration discount; net debt projected at €5.8M under courses B and C. Each of these three assumptions is qualified; none is established.
Should the largest customer withdraw during the interval, course B is worth €3.3M to €4.4M rather than €17.7M to €19.9M. The spread between the best and the worst outcome of course B is of the order of €15M, and it hangs on a single fact we were unable to establish.
That is why this dossier does not recommend B; it is also why it does not recommend A.
What the calendar does to the four courses — and the first move
Three of the four courses require information that will exist only in April, or several weeks of search. One course requires neither: accepting.
The 24 March deadline therefore does not ask you to choose among four courses. It asks you to take one, because it is the only one that fits the time available. This is an effect of the calendar rather than a result of analysis — and an effect of the calendar can be treated.
The first move this dossier investigates is not an answer: it is a request for an eight-week extension of exclusivity, taking the deadline to 19 May.
Those weeks cover the annual review of the framework agreement due during April — the one meeting where the question of volume can be put without the asking signalling anything — and they leave three weeks to investigate course D1.
A useful move is distinguished from a well-managed one by what it displaces. Negotiating two tenths of a multiple improves one line of the agreement, and the rest of your situation stands as before. Asking for eight weeks reopens three courses out of four, brings the fact that commands the decision within reach, and leaves time to investigate a player you have not yet approached. The first belongs to negotiation. The second is the move played where the decision rests — Go calls this “to play where it is decisive rather than where it is large.”
What the request costs. An extension of exclusivity is a common request and it is granted more often than refused, particularly when it is motivated. It carries a real price nonetheless: it signals hesitation, and a fund may take the opportunity to revise its terms. It should therefore be motivated by what makes it legitimate rather than by what makes it necessary — the annual review of a major framework agreement is a fact any investor will recognise as structural, and one whose outcome it has its own interest in knowing before signing.
What has to be prepared at the same time, and this is what makes the request credible rather than dilatory: the written formulation of what you will ask the customer in April, and what you will offer in return.
The twelve days, and what this dossier did not establish.
The twelve days
Contractual grounds, an undertaking to give a definitive answer by 19 May, confirmation that exclusivity is maintained.
What you ask of the largest customer — a multi-year volume commitment — and what you offer in return — reserved capacity on the extended plant, which has value for that customer if its own market grows. This is an ordinary commercial act; it signals nothing.
Framing of the five players identified, no approach.
Without it, courses B, C and D2 all three rest on an undocumented assumption.
The trade-off then becomes personal rather than economic: the discount against the uncertainty. That case is investigated in § 07.
What this dossier did not establish
A key lying alone on a bare table. Neither lock nor door in the frame; the light comes from beyond the edge.
not established
This is the most important point in the dossier, and it is empty. No primary source establishes it: the framework agreement carries no volume commitment, the orders of the last three financial years are stable without growing, and no usable public signal exists — the customer is not listed, publishes no strategic plan, and its filed accounts do not allow the product line concerned to be isolated.
What would settle it: a multi-year volume commitment, or failing that an indication of trajectory given at the annual review. Where to look for it: the April annual review, article 9 of the framework agreement. What it costs: nothing, and the move is a normal one. What it changes: everything. It is the one fact that moves the decision from a blind trade-off to an informed choice — and it is for that fact alone that the first move in § 09 is worth making.
The additional debt capacity qualified — the €4.4M indication is verbal, given on 6 March, non-binding. Courses B, C and D2 all depend on it.
The eighteen-month business plan qualified — we adjusted it on two lines that struck us as optimistic: the ramp-up time for the sales force, taken from six to nine months, and the margin rate on the new ranges, brought back to the level of the existing portfolio for want of any element supporting a higher one. The projections in § 08 are built on that adjusted version, not on yours.
The concentration discount qualified — nine transactions, five of them at an estimated multiple. This is a robust order of magnitude rather than a measurement.
The strategic appetite of the five players in course D1 not investigated — the exclusivity in force forbids any approach. Three weeks would suffice, once exclusivity is lifted or extended by agreement.
What we commit to, how this dossier was produced, and where the exhibits come from.
The frame
What we guarantee
This dossier investigates your decision; you take it. That is the contractual object of the engagement, and it is put thus: we investigate the decision; we assess no one.
Every conclusion is carried and signed by a person, by name — none is produced by an automatic chain. No decision is automated: this dossier expresses no recommendation among the four courses; it states what each one costs and what would have to be true for it to be the right one. The engagement bears on no person: none of your people has been assessed, no evaluation interview has been conducted, no instrument of individual measurement has been used — the object of the engagement is a decision of capital, and the contractual scope excludes that explicitly. Every statement carries its regime, and what is not established appears in § 11 without being filled in. Your documents were processed through professional services bound by an agreement excluding the use of content for the training of models, and they are returned or deleted under article 8 of the engagement letter.
What this dossier is not. It constitutes neither legal advice, nor tax advice, nor an investment recommendation within the meaning of financial regulation. Three points call for the opinion of your qualified advisers before any decision: the drafting of the governance and liquidity clauses of the shareholders' agreement; the tax treatment of the contribution-and-sale rollover under scenario D2; and the compliance of the holding-company structure with the undertakings in your existing bank agreements.
How this dossier was produced
The grid is at the head of the dossier. What remains is what fed it, and what settled it. Ten days, three links.
One — the investigation. Your documents first, because that is where the findings that decide are to be found: the accounts receivable ledger over three financial years, the framework agreement and its amendments, the draft shareholders' agreement, finance-lease schedules, monthly production records, the business plan. Then the outside: nine comparable transactions reconstructed from registry filings, press releases and the trade press; five upstream players identified by cross-checking trade directories, trademark filings and sector publications; the regulatory framework applicable to the ranges concerned. Eleven sources and registers were interrogated; three returned nothing, and that is written below.
This link is the least visible part of a dossier and it is the one that decides what gets found. The finding in § 06 — €3.0M enters, €6.63M leaves, the programme costs 4.2 — owes nothing to subtlety of analysis: it comes from having read the letter of intent and the extension quotation with the same attention, and from having costed your need before looking at the offer. That is what no one had done, not out of negligence, but because each of your advisers was reading one of the two documents.
Two — the matrix. Described at the head, applied in § 03 to 11. It is built for this type of question and for no other: a grid is derived from what actually decides the outcome, and is tested on known cases before being applied to a new one.
Three — the judgment. The reversal in § 06 — the variable is the order of operations, the price follows — and the first move in § 09 are judgments. No calculation produces them. They are dated, they are contestable, and they are signed.
The name of the thing. In the game of Go, the tesuji is the skilful move — the one played at the point that decides the game, often far from where attention is drawn. It is the name we give to the last link: the reading locates, the move is played there, and someone signs it.
The exhibits
Each entry states what it establishes, the mechanism when a figure comes from a calculation, and what it does not establish.
| Exhibit | What it establishes | What it does not establish |
|---|---|---|
| P1 Accounts receivable ledger (2023 to 2025) | The breakdown of revenue by customer and its stability. | Profitability by customer: the management accounts do not go down to that level — worth noting whichever course is chosen. |
| P2 Framework agreement of 14 April 2021 (and its two amendments) | The renewal regime, the notice period, the absence of any volume commitment, the existence of the April annual review. | Any intention whatsoever. |
| P3 Letter of intent (10 February) | The price, the size of the stake, the primary / secondary split, the principles of the shareholders' agreement. | The governance and liquidity clauses, left to the definitive documentation — course A is therefore not fully investigated until they are known. |
| P4 Plant extension quotation (8 January) | The amount and the lead time. | Ninety days' validity: the quotation expires on 8 April. |
| P5 Business plan of 28 February (and its adjusted version) | One possible trajectory. | Its probability. |
| P6 Nine comparable transactions (2021-2025) | A gap between two populations. Mechanism: enterprise value ÷ EBITDA of the financial year preceding the transaction; four public multiples, five estimated; segmentation by the share of the largest customer above and below 30%. | A multiple applicable to your company. |
| P7 Five upstream players (identification sheet only) | Their existence, their scope, their ownership. | Any appetite: no approach has been made, and none will be made without your instruction. |
| P8-P10 2025 production records · finance-lease schedules · filed accounts 2022-2024 | The saturation of the plant, the debt structure, the financial position. | — |
What returned nothing
Three searches came back empty, and that is part of the dossier. Your largest customer's filed accounts do not allow the product line that concerns you to be isolated, the sector detail not being published. The search for public communications by that same customer on its sourcing strategy is negative over five years. And two of the comparable transactions initially retained were set aside for want of a multiple that could be reconstructed defensibly — they do not appear in the sample in § 05, and the gap stated therefore rests on nine transactions and not on eleven.
A search conducted without result is information. Omitting it would suggest it had not been made.
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An illustrative situation. Facts in this dossier stated as at 11 March.
What is not established is not asserted.