Blog - Helpful tips when buying a business
Monday, 20 February 2017
Some of you will be well versed in the process of buying a business, but even the most experienced acquirer can still need a helping hand from a third party to offer a more independent and objective view.
At the offer stage there are some really important areas to consider to set the transaction ‘scene’ on the right footing. Most acquirers do not actually want to chip a price at a later date unless the findings from their due diligence make it unavoidable. So setting the right ethos from the start will go a long way with the seller. Part of this requires pitching at a price you feel comfortable with whilst accepting that some potential issues will emerge that may not automatically demand significant adjustments to the deal structure.
Some tips we can offer acquirers for the early stages are:
- Build rapport with the seller, especially where you need them to provide a long handover or consultancy period after the deal completes.
- Be sensitive to the fact that most sellers will only go through this journey once, so display patience and understanding.
- Consider your tax position, both now and when the deal completes, and also consider how this might impact your own exit strategy in the future.
- Be fair in your negotiations, the old saying of ‘treat people how you would like to be treated’ is worth remembering.
- Maintain integrity throughout.
- Consider your due diligence requirements, bearing in mind there is legal, financial, commercial, and now more often than not technology. Who will conduct these for you, do they have the relevant experience? Will they conduct themselves on your behalf with an appropriate level of diplomacy through what is sometimes quite an invasive and onerous procedure for a seller.
- Think about how much due diligence is being conducted and keep it in context to the size of transaction.
- Legal documentation will need to be drafted by a lawyer. But there are also some areas within the documentation where a corporate finance advisor can add value, particularly on the tax covenants, warranties & indemnities, accounting policies and working capital mechanism.
Generally, a buyer and their professional team need to be commercially minded and flexible with the approach to each deal, and tailor their approach on a case-by-case basis.
To contact James and find out more and how we can assist, call 01603 624181 or email firstname.lastname@example.org