Business transfer and valuation: methods, structures and French tax in 2026

Author: Samuel HAYOT, chartered accountant (expert-comptable)

Business transfer and valuation form a single integrated process, but in 2026 buyers, their advisers and their financiers are scrutinising files with heightened rigour. Understanding which valuation methods are being applied, anticipating the deal structures available, and commanding the tax treatment of the sale has become essential — if you want to avoid leaving value on the table.

In brief: a French SME typically sells for between 3× and 7× restated EBITDA depending on sector, but that multiple is adjusted downward when management is concentrated in one person, working capital is under-financed, or non-operating assets distort the picture. Net proceeds after tax then depend on the chosen structure and on how long the shares have been held.

No valuation method is neutral. A seller who knows market benchmarks can defend a price; a seller who arrives without substantiated figures concedes the framing to the buyer. In practice, several approaches are combined to bracket a value range, and it is the gap between them that drives the negotiation.

Worked example — B2B services company: Revenue €5 M, EBITDA €800 k after restatements (owner salary normalised to €120 k, notional rent corrected). Sector multiple range: 5× to 6×. Enterprise value range: €4 M to €4.8 M. After deducting net debt (€150 k) and adding surplus cash (€200 k), equity value falls between €4.05 M and €4.85 M. A five-year DCF at a 12% discount rate confirms the lower bound at €4 M, tightening rather than widening the negotiation range.

A raw multiple is never applied without restatements. The main factors that move the final valuation up or down are:

• Owner dependency: if more than 40% of revenue relies on the owner's personal client relationships, buyers apply a discount of 10% to 25%. This is the primary risk factor identified in French SME transfer files.
• Working capital (besoin en fonds de roulement — BFR): a structurally high or under-financed BFR absorbs cash and reduces available free cash flow. The buyer will deduct it from enterprise value or demand a price adjustment mechanism.
• Property held by the operating company: if the company owns its premises, the real estate value should generally be ring-fenced and valued separately — either via an associated SCI or at market value. Mixing operations and property distorts the earnings multiple.
• Off-balance-sheet items and atypical contracts: ongoing litigation, guarantees given, unprovisioned commitments. Each point triggers a representations and warranties clause (garantie de passif) in the sale agreement.

The choice of structure conditions both acquisition financing and the seller's tax treatment.

LBO (leveraged buy-out): an acquisition holding company is created, takes on senior debt repaid through dividends upstreamed from the target. This suits third-party buyers or management teams. Leverage amplifies the investor's IRR but requires sufficient operating profitability to service the debt.

OBO (owner buy-out): the owner sells part of their capital to a holding company they control, monetising wealth while retaining management. The OBO provides partial liquidity and estate planning benefits, but French tax authorities scrutinise these arrangements closely for potential abuse of law (abus de droit) where the transaction lacks genuine economic substance.

Family buy-out: transfer to one or more children or family members, often combined with a Dutreil pact (pacte Dutreil) to reduce gift or inheritance tax. The emotional dimension and equal treatment of heirs frequently complicate this type of structure.

Dutreil pact (Article 787 B CGI): this provides a 75% exemption on the taxable value of shares transferred by gift or inheritance, subject to strict conditions: a collective holding commitment (engagement collectif de conservation), an individual holding commitment, an active management role, and a minimum ownership threshold. The conditions are demanding — holding periods, management function, participation thresholds — but the tax saving is considerable for substantial estates.

For further guidance on structuring your estate during a transfer, see our article How to optimise your estate.

The tax treatment of a share sale in 2026 is governed by the French professional capital gains regime. Two main scenarios apply.

Holding period allowances on capital gains#

Retirement relief (Article 150-0 D ter CGI): the enhanced 85% allowance applies when the owner sells shares within the two years before or after their actual retirement, provided they held effective management of the company for at least five years, held at least 25% of voting rights for at least one year, and have actually retired (formal liquidation of pension rights) within the required window. Strict adherence to the calendar and the thresholds is mandatory — a gap of a few months can cost the entire benefit.

Our reading: in the files handled by the firm, retirement relief is the most powerful mechanism available to owner-managers approaching 60. But it demands planning 24 to 36 months ahead at minimum. Waiting until the last moment is the most frequently observed — and most costly — mistake.

The buyer profile fundamentally changes the terms of the sale.

Sale to a third-party trade or financial buyer: this is generally the route that maximises price. The buyer pays for synergies or a target IRR. In return, the seller loses control immediately and must accept an earn-out clause if projections are stretched.

Sale to managers (MBO / MBI): the price is often slightly below market, but continuity is better assured and the transition is smoother. Management rarely provides all the funds — a leveraged MBO with bank debt is the norm. The sale protocol (protocole d'accord) and the garantie de passif are critical documents in this structure. See our article The sale protocol in a business transfer.

Family transfer: the Dutreil pact substantially reduces gift or inheritance tax, but the price cannot be freely undervalued (risk of a deemed gift if valuation is too low). Co-existence between active and passive heirs is a recurring friction point that must be anticipated in the shareholders' agreement or a specific pact well before the transaction.

The DGFiP pays particular attention to the following points during a transfer:

• consistency between the declared sale price and the value used for registration duties;
• Dutreil pact compliance: breach of the holding commitment triggers full reassessment of the exemption with a surcharge;
• OBO substance: the structure may be requalified as an abuse of law if it has no genuine economic substance of its own;
• reintegration of non-professional charges restated through a holding company (remuneration, miscellaneous costs).

1. 18–36 months before: financial, legal, tax and employment diagnostic. Identify discount factors. Begin corrective actions (reduce owner dependency, clean up the balance sheet).
2. 12–18 months before: choose the deal structure and buyer profile (third party, managers, family). Multi-method valuation. Build the information memorandum.
3. 6–12 months before: approach buyers or initiate Dutreil planning. Negotiate the letter of intent. Buyer due diligence (audit d'acquisition).
4. 0–6 months: sale protocol, garantie de passif, final deed. Post-transfer transition management and handover.

To better prepare the way a potential buyer reads your business value, see also Assess the value of your business.

A client of the firm — majority shareholder-manager of an IT services SARL (société à responsabilité limitée) for 18 years, revenue €4.8 M, EBITDA €750 k. Three problems identified at diagnostic: 55% of revenue concentrated on two clients, no operational deputy (N-1), premises owned by the company. Action plan over 30 months: recruitment of a technical director, commercial diversification, and extraction of the real estate into a separate SCI. By the time of sale: client dependency brought down to 30%, the business ran 80% of the time without the owner's involvement, and the SCI was sold separately. The multiple achieved moved from an estimated 4× at the outset to 5.5× at completion — with the 85% retirement relief applicable to the capital gain on the SARL shares.

The underestimated risk: the garantie de passif clause. Sellers often negotiate it too quickly. Its scope, duration (typically 18 to 36 months after signing) and cap (commonly 20% to 30% of the sale price) deserve exactly the same rigour as the valuation itself.

• The discount rate used in DCF models has risen since 2022 (rate environment). A rate of 12% to 15% is now standard for SMEs, which compresses values calculated by this method.
• The pension reform modifies the eligibility conditions for retirement relief under Article 150-0 D ter CGI: the effective date of pension liquidation must fall within the regulatory window. Verify on a case-by-case basis against the planned sale date.
• Transfer files in 2026 increasingly incorporate an ESG (extra-financial) dimension: trade buyers and funds are requesting information on environmental impact and governance. This is not yet systematic for SMEs, but the trend is real.

This article is for information purposes only and does not constitute personalised advice. Any transfer or sale decision should be preceded by a full review of your specific situation with a chartered accountant (expert-comptable) and, where appropriate, a tax lawyer.