Buying a business? It pays to be prepared

In my last blog, I highlighted some key actions for business owners looking to sell.  But what of established businesses seeking expansion through acquisition?

 

Once again, whether this is a new venture or part of a programme of acquisitions, it pays to be prepared. This does not necessarily mean that business owners need to know exactly when they will start their “buy and build” strategy, it just means that a little attention to detail early on could pave the way for a more satisfactory outcome.

So here’s my checklist of points to consider:

  • Authority: does the board have authority to undertake the acquisition. Are there any shareholder or bank consents required?
  • Synergies: will the potential business integrate well with the current business? What is the rationale for buying it?
  • Employees: will all employees be take on? Will there be some senior members in dual roles?
  • Location: where is the business located? Do you need this additional location?
  • Finance: how will the acquisition be financed? If by external financiers, what security are they expecting? Does this affect the current financial arrangements? How much will the buyer pay? How has the business been valued?
  • Consents: Do the sellers have the necessary consents to sell? Does the buyer have consent to acquire.
  • Due Diligence: What due diligence has the buyer done on the selling business? Commercial? Legal? Financial? Insurance?
  • Competition: Is the buyer or the seller a market leader? Are there any competition law aspects to be concerned about?
  • Compliance: has the seller all of the licences it requires and maintained good corporate governance?
  • Tax and structuring: will this be a share sale or an asset sale? Have the acquirers taken tax advice? Does the buyer want the seller to reorganise the business before they buy?
  • Timing: is there a better time to buy?

If you are buying a business, you take over an operation that's already generating cash flow and profits. You may be acquiring an established customer base, reputation and employees who are familiar with all aspects of the business. You do not have to reinvent the wheel, setting up new procedures, systems and policies, since a successful formula for running the business has already been put in place. However, if you are integrating this business with a business you already own, you do have to find synergies with your existing business and you may need to reorganise your workforce.

Need to know more? Need a helping hand to guide you safely through all the legalities of the processes involved?  My team and I are happy to help by providing as much or as little support as you need.

Victoria McMeel
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