Thinking of Buying a Business?
Buying a business is more often than not, an attractive proposition compared to building an organisation from scratch. There is much less risk, especially if staff, equipment, suppliers and customers are all in place, giving you the opportunity to enjoy the benefits and rewards of business ownership from day one.
Of course, there are still many risks and responsibilities and you will need to possess entrepreneurial spirit, motivation and determination to manage and improve your new business. You will also need to ensure that you evaluate all the available businesses for sale in order to choose the best business to suit your experience and long term objectives.
An acquisition plan will improve your chances of finding the right investment for you. It should include business type, industry sector, location and size, but you also need to give consideration to the current performance of your target company. Do you want to take on the challenge of a struggling business with huge potential but high risk, or would you prefer a safer option? Once you have a clear idea of what you’re looking for, you can start your search.
Finding the Right Business
Businesses for sale are usually advertised through local or national daily papers, trade magazines, on specialist web sites and/or through intermediaries, often known as Business Brokers or Business Transfer Agents/Specialists, such as Stirling. Before any information is imparted, you usually have to sign a Confidentiality Agreement or Non-Disclosure Agreement (NDA). Business Brokers or Business Transfer Agents should be able to discuss your requirements in detail, to see if they have listings that may be of interest to you. Although fees are normally paid by the person selling a business, a fee or a “finders fee” may be chargeable if you ask a broker or agent to carry out search specifically for you.
Once a possible acquisition has been found, you will need to be supplied with detailed information to enable you to form an opion about the company’s financial performance, position in the market, history, personnel, strengths, weaknesses, costs, assets & liabilities etc, along with the owner’s reason for selling. Much of this information should initially be provided in the Information Memorandum (IM) document which is (or should be) provided by the business owner, agent or broker. Additional information such as Statutory Accounts and Management Accounts are only normally provided if the buyer wishes to take matters a step further and in some cases, only after a visit has been made to meet the person selling (Vendor).
Please note that in some cases, there maybe a few questions that will need to be answered before a Vendor will provide you with any information at all. This is quite normal, particularly for well established, profitable businesses, where the business owner(s) will want to make sure that no one is going to waste their time!
Vendors will often want to understand your industry associations prior to progressing matters and may request a brief explanation regarding the basis of your interest and your circumstances. In particular, they may want to know if your interest is as an individual, group of individuals or on behalf of an organisation and may want to see copies of the CV’s of the individuals involved. They may also want to know if you or your organisation have made any acquisitions in the past and will want to know what your funding sources are.
Buyers need to be prepared in buying a business, just as Vendors need to be prepared in selling a business!
What’s it Worth?
You need to decide what the business is worth to you. What’s the current operating profit? What level of salary are you hoping to achieve or accept? Are there opportunities for expansion and increased turnover? Is the level of risk reflected in the return on investment?
Whatever the asking price, you need to be aware that there are at least five different valuation methods and you can be assured that the person selling will often choose a different valuation method to the person buying. It is as well to obtain your own independent valuation before making an indicative offer or agreeing Heads of Terms. Before the price is agreed, you need to be sure that the price fits with the finances, risk levels and aspirations of your Acquisition Plan.
For your independent business valuation letter or full report please CLICK HERE
Fundng an Acquistion
For those business owners who haven’t thought about growth by acquisition before, there are several financing options available from finance specialists who have access to institutional lenders, without have to rely on the mainstream banks! Our specialist advisor has access to a number of institutional lenders who are backed by pension funds, family offices and High Net Worth Investors who have a strong appetite to fund good quality acquisitions, whether they are MBOs, MBIs or part of a buy-and-build strategy.
For further information on Funding for Acquistitions, please CLICK HERE
Buying your Business
Once a price and Heads of Terms has been agreed, you will be entitled to a period of exclusivity, to allow time for the financial and legal status of the business to be reviewed. In addition to this process of due diligence, many other legal agreements, such as the preparation work for lease transfers need to be taken forward for when the sale is finalised. If the business is already successful, you might want to negotiate a handover period, whereby the seller is employed by you for a period of time, to ensure continuity.
Running a business can be extremely rewarding both personally and financially, but for most people it isn’t an ‘everyday’ activity as it can become stressful if the right decisions are not made. In this respect, it is worthwhile considering using a business broker or business transfer agent to help negotiate and act on your behalf.
Not sure where to start?
Stirling partners with a specialist broker that can help you (the Buyer) put up substantial sums of money, without saddling you with huge debt.
Whatever type of business you would like to buy, we can help source the business that you want and help source the finance, so long as the business is UK based and that the Turnover and/or Value is between £1m & £10m.
We have access to hundreds of businesses ready to be purchased off-market, in a variety of industry sectors.
Sounds too good to be true? Not really, through our contacts, we have the businesses available along with finance from The City to help you achieve a business acquisition and become a business owner without risking your house and contents!
This is a unique and specialist service, so for further information, simply complete the form below: