Buying a business is a delicate operation during which one can encounter some difficulties. Fortunately, by following a series of steps, a successful transaction is possible. Our advice.
Our strategic advice for buying a company
1. How to buy a company?
The value of a business depends on the assets acquired. Before you buy a business, make sure you know what assets the company has. Don’t forget to look at less obvious assets, such as customer databases, operating manuals, brands and products. Be sure to acquire all of these assets. But also intellectual property, machinery, inventory and office equipment, for example.
2. Due diligence
A seller always presents his or her business in the best light. It’s up to you to do some additional research. You’ll need to dig into the company’s records and performance:
- Try to get access to customers and suppliers, ask their opinions, their future plans.
- Check the existing contracts, those being signed and those that you may have to renegotiate.
- Conduct a due diligence on the legal elements: do the assets of the company really belong to the seller?
- Involve your accountant. Ask him or her to analyze the company’s financial situation and its long-term viability.
Read also: 4 essential reflexes before taking over a company
3. The issue of employees
Employees are the key to a company’s success. Buying a company is therefore also buying its employees. It is essential to define your project very quickly. Are you going to take over all current employment contracts? Do you intend to renegotiate them? What are your workforce requirements? Remember to also determine whether you are responsible for the employees’ vacation entitlements!
4. Commercial premises
Are the company’s offices, warehouses and stores leased? If so, what are the terms of the lease? Make sure of the rent price, the remaining lease time and the renewal rights. All this to avoid the unpleasant surprise of having to move a few months after your acquisition!
5. Buying a business: the terms of the contract
The negotiation of a business transfer allows to agree on the sale price (including tangible and intangible assets and inventories). But also on the terms of the contract. These include:
- A deposit: a percentage of the total purchase price to be paid at the time of signing.
- Guarantees: especially on the company’s turnover. The seller generally guarantees that every effort will be made to maintain the company’s good health. Also, if there is a sudden drop in the company’s revenues, the seller is obliged to compensate the buyer, according to the provisions retained in the contract.
- Assistance: after the settlement and the transfer, how will the seller be assisted? It is interesting that he introduces the buyer to the suppliers, the board of directors, the customers, etc.
- Restrictions: and other non-compete clauses, which prevent the transferor from operating another business after the transfer or soliciting the customers and employees of the transferred company.
- The financing: and the suspensive conditions of the contract. Also, if the bank refuses your loan, the acquisition is suspended.
Read also: Which financing for a business takeover?
It is understandable that the purchase of a company requires various and complementary skills. Be accompanied by experts – lawyers, accountants and transmission specialists – who will help you to buy well and to minimize bad surprises. For your project, contact Actoria.
