In the title we speak of intermediaries in business transfers but from a semantic point of view, this term is no longer adapted to the current situation.
Indeed, the intermediaries as we used to hear them 15 or 20 years ago have almost all disappeared in favor of advisors for sellers and buyers. The professional you will be facing either represents the interests of a seller or will propose to accompany you in your approach within the framework of a mandate to accompany the takeover.
So let’s get down to business and see how to interact with these professionals.

What are the 4 things you need to do to properly engage in a recovery process?

The first thing to do is to do a self-diagnosis of your strengths and weaknesses so that you have a clear picture of what type of business is right for you. You need to make sure that any company you target matches your strengths and will not suffer from your weaknesses.
Second, don’t be confused about the size of the business you can afford to take over. Think bigger than your eyes. There is nothing dishonorable about taking over a modestly sized company.
Third, find a company that has a solid foundation and has prepared for the transition. It’s better to have a company in a traditional, unsexy but well-run industry than a company in a niche but poorly run industry.
Finally, and this is really the most important thing – you need to educate yourself on the recovery, which you do at the ARC very well. There are ongoing decisions to be made with a lot at stake throughout the takeover process. Investing a little bit of time to gain the specific knowledge needed for recovery both upstream and downstream will yield huge results.

What are the biggest mistakes that buyers make in this process?

A common mistake is to think that financing will not be complicated, that with a few thousand euros in their pockets they will be able to buy a multi-million dollar company and that banks lend money easily for small business purchases.
In reality, banks rarely lend and without the intervention of the BPI, very few banks would finance business takeovers. This is
why it is so important to be accompanied by professional financing specialists.
Another problem is that some buyers tend to become too emotional during the takeover process and fall in love with a company by already seeing themselves as owners and already thinking about the best way to develop the company. They are even certain that they will do better than the owner, even though the owner has tried many things before them.
More prosaically, it is better to aim for a good business with a solid history that will allow you to gradually understand how it works before playing a leading role in its development.

What personal considerations should a buyer take into account when deciding to buy a business?

There are many considerations, but two main ones.
First, how will becoming a business owner impact your lifestyle?
For example, are the business hours compatible with the lifestyle you want? If you’ve just had children and want to enjoy them without being a slave to a business, you’ll want to avoid certain areas.
Second, make sure you have sufficient financial resources in case the business fails or if you need to invest in the development of the business to ensure its growth. Too many businesses fail because of a lack of capital.
What kind of research is important to do before making an offer?
In many cases before making a proposal in the form of an LOI, you will not have access to complete accounting, contracts, customer lists and other confidential information. You will usually have access to this information during the formal due diligence period that occurs after an offer is accepted.
So before that, the key is to do as much research as possible. Obviously, balance sheets, either published or provided by the seller, should be understandable and, generally, you will have access to general financial information to make a proper valuation. At this stage do not go into the justification of the accounts or the restatements made in the case of economic accounts if a transferor gives you restated accounts.
It is also imperative that you study the company’s global market, its products and services, the competition and how it is positioned in relation to the competition, whether or not it owns its premises, and the remaining life of its industrial assets.

Who should buyers contact for advice or assistance with a business acquisition?

This is really a huge problem and a very important issue.
There is, without a doubt, a misconception with far too many takeovers and especially those who are just starting out. First of all, as far as
resources are concerned, you absolutely need a lawyer who is competent in business takeovers and, ideally, in the transaction sizes you are targeting. The lawyer’s role is to transcribe the transaction and ensure that the buyer is protected. You should not turn to lawyers to negotiate your deal.
Most of them are not good (even if they think they are) and more often than not, they get in the way of the deal.
You will also need an accountant to do the audit of the company and the financing plan and the financing package including the business plan to be submitted to the banks.
Thirdly, you need professionals of the transmission.
And this is where the buyers are mistaken.
The professionals have a specific but limited role. They can help buyers get access to the businesses for sale, act as a buffer between the parties, and help close the deal at the negotiating table because they have done it before.
However, unless a buyer pays them directly, which rarely happens, the mandate is between the seller and the intermediary, they only represent the interests of the seller and not the buyer, so looking to them for unbiased advice is a bit silly.
This brings us to the question of an expert advisor for a buyer. You either need a mentor or you need to hire an experienced takeover consultant. Every buyer should have someone on their team who has experience in taking over a business and will only look out for their best interest. Having an independent expert on your team will probably be the best investment you make during the buyout process.

What types of businesses should novice buyers target?

If this is your first takeover, you need to buy a business you understand – one that doesn’t have a steep learning curve, something simpler.
The most important thing is to have support after the sale, which requires a smooth transition to a new owner. It is quite rare that you can understand the complete operation of a business in 1 month 2.
What advice can we give to buyers to find financing?
It would be great if traditional banks would finance small business purchases, but they rarely do.
There are good public mechanisms such as the BPI, but the eligibility criteria severely limit who can get a loan.
You can turn to family and friends, which is of course possible, but the relationship will often be tricky to manage especially if you don’t stick to your financing plan.
The right way to finance the takeover is the seller. First, it is common for part of the price to be indexed to future results. Secondly, in most cases, this is the only way to finance a takeover and thirdly, it serves to validate the seller’s commitments in terms of future results.

What are the most difficult or challenging aspects of the recovery process?

There are three aspects.
The most difficult is finding the right company for your skills. This can take time and it requires diligence.
Another difficult aspect is usually understanding the financials that the seller has presented. There are often restatements to be made on an SME and the tax accounts rarely correspond to the economic reality.
At this stage, consider that the valuation given by the intermediary is correct with a maximum negotiation margin of 25%.
Don’t forget that intermediaries are generally paid on the basis of results and have no time to waste with far-fetched valuations. You will have more problems with valuations set by the sellers or their accountant.
Finally, you must consider the future. Obviously, you cannot predict it, but you can ask questions about the company’s current strategy. It is up to you to verify whether this strategy suits you or needs to be modified. Defining a future strategy for the company requires receiving a lot of information from the seller but also projecting yourself into the future.

What final advice should you give to potential buyers?

It’s obvious: taking over a business is a process.
There are very specific steps to follow:

• Getting ready
• Search and selection of targets
• Make a diagnosis of targets
• Discussions and proposals in the form of a LAW
• Negotiations
• Contractings
• Transition in management

It takes time and work, but it’s worth it.
However, the only way to succeed is to have the specific knowledge to make all the right decisions and as I have said far too many times over the past 25 years, “You have to learn before you can win“.
Speech by Mr. Lange at the CRA Paris, 04/12/2017