Entering the business realm by acquiring an established company, or expanding your current business, can be an exciting venture. However, this decision demands careful consideration and informed decision-making.
When you’re on the brink of becoming the owner of a new business, it’s imperative to conduct thorough research and collaborate closely with a team of advisers. Consider these essential considerations before finalising any deal:
- Understanding the Seller’s Motivation: Uncovering the reasons behind the sale is crucial. The current owner might be looking forward to retirement or a new venture, but there could also be underlying issues such as poor performance or legal troubles. Key inquiries should include:
- Reasons for the owner’s departure.
- Potential financial or legal complications.
- Personal motives behind the sale.
- Financial Health of the Business: A common hurdle in both startups and established businesses can be cash flow challenges. It’s crucial to examine the financial health of the business meticulously:
- Obtain and scrutinise the business’s financial statements, with professional help from an accountant.
- Be on the lookout for red flags like debt, losses, or cash flow issues.
- Confirm that the business is profitable with a robust financial base.
- Assessing the Workforce: Your team is a pivotal asset. It’s important to familiarise yourself with the staff before taking over the business:
- Engage with key employees to understand their perspective.
- Ensure the core team is committed to staying post-sale.
- Consider the implications and costs of potential staff turnover.
- Due Diligence and Governance: Conducting thorough due diligence is vital for ensuring the business is a sound investment free from legal entanglements or undesirable connections:
- Review all contracts and legal agreements.
- Perform comprehensive checks on the company and its proprietors.
- Seek legal counsel for any uncertainties.
- Securing a Fair Purchase Price: While acquiring a reputable business is advantageous, it’s important to negotiate a reasonable deal:
- Research to ascertain the business’s market value.
- Be prepared for negotiation to achieve a better price.
- Be ready to withdraw if the deal doesn’t meet your valuation criteria.
Additional Assistance in Your Business Acquisition Journey
This list is not exhaustive, and purchasing a business involves many intricate factors. Partnering with professional advisers is key to navigating this complex process successfully.
As your adviser, we’re here to assist you with:
- Running thorough due diligence checks.
- Evaluating the business’s financials for potential issues.
- Identifying suitable financing options.
- Providing connections to M&A specialists.
If you’re contemplating a business acquisition soon, we encourage you to discuss your plans with us for expert guidance and support.
