Buying Your Business
Buyers experience a mixed bag of emotions when buying a company for the first time, including excitement, fear, and apprehension. AdvantEdge Advisors guides its clients through the acquisition process; all guesswork is eliminated. We diligently help the client clarify goals, search for the right investment, negotiate an acceptable deal with legal and tax professionals, manage financing and structuring, and see the transaction through closing.
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The Tactical Target Acquisition Process
STEP ONE - DEFINE INVESTMENT CRITERIA Evaluate what types of businesses might be suitable to your resources, background and geographic interests. Most buyers don't know what they actually want, just what they don't want. Remember that there is no such thing as a perfect business so pursue one that is an 80% fit and mold it to your desires. Stay open minded and search broadly, narrowing your search as you become more knowledgeable. STEP TWO - SEARCH AND FIND Through your own efforts or by engaging a professional advisor to assist you, find an acquisition opportunity that appears to be a possible good fit. STEP THREE - PURSUE FROM A POSITION OF STRENGTH Adapt your resume to the industry and have a personal financial statement and good credit report available to demonstrate your qualifications to acquire a business. Sign a confidentiality agreement to assure your pursuit is not a threat. STEP FOUR - PRELIMINARY ASSESSMENT AND RESPONSE A business that is properly prepared for market, will furnish a comprehensive review that will address most of the key questions you should have. Have the courtesy to provide your initial thoughts within five business days. STEP FIVE - SITE VISIT You will best understand the pulse and operation of the business by scheduling a visit. STEP SIX - CONDITIONAL OFFER & NEGOTIATION A buyer will not be able to get all or even most additional questions answered before presenting a conditional offer or letter of intent. Save your valuable time, and that of all involved, by trusting the initial information provided and formulate a realistic offer. You will be afforded ample opportunity in due diligence to dig in as deeply as your require. STEP SEVEN - DUE DILIGENCE, DEFINITIVE TERMS & CLOSING Schedule due diligence to occur in a short window of time shortly after an offer or LOI is agreed upon. As early in the process as possible, both buyer and seller will want the further assurance that getting past due diligence provides. Closing may take longer, but strive to complete due diligence and draft definitive purchase agreements as efficiently as possible.
FAQ
To help you enter the partnership with AdvantEdge Advisors as knowledgeable participants, here are the answers to the most frequently asked buyer questions. Is there a screening process involved? Yes to ensure the buyer's and the seller's goals are aligned. Why do I have to provide financial information to AdvantEdge? It will show your fundamental ability to make an acquisition of substance, saving your valuable time and the time of all parties involved. We realize that just because you have a million dollars, doesn't mean that you are going to spend it all on buying a business or that you will pay more than the business is worth. Will my personal information remain confidential? Confidentiality is extremely important to AdvantEdge Advisors. Your profile will be securely stored and accessed only by those associates working on your project. This information is proprietary and will not be made available or sold to anyone else. Businesses are for sale because there are problems, right? Businesses are for sale for lots of legitimate reasons besides the owner is getting old and wants to retire. Eight out of ten businesses are for sale simply because the current owner has been doing it for a long time and wishes to pursue other business interests. While there is no such thing as a perfect business, new ownership often reinvigorates and re-energizes the business allowing it to move into higher levels than ever before. Will I have to pay for good will? Yes, good businesses will command (in the markets) a price well beyond that of tangible asset values. Bad businesses are offered routinely as "asset sales" which means you would be indeed buying "hard assets" but those assets don't produce anything of interest. Don't get too hung up on the goodwill component. Should I borrow significantly to buy a business? Everyone has different tolerances for risk. Let's assume that you can buy a business that generates $100K in earnings for $400K cash. Alternately you can take the same $400K and with leverage, buy a business that generates earnings of $400K. Most astute business buyers will choose more performance in exchange for responsible debt leveraging. |
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