If you have just decided to start looking for a company to buy
you will need to understand the fundamental assumptions
involved before you make your first step to purchase the
“right” company.
This article will give you a quick “fly-over” of basic business
acquisition insights learned over many years of pursuit of
finding the ideal company that meets one’s EXACT purchase
criteria. Purchasing a business can be a complex, iterative
process made up of many steps. Most steps within the process
should be implemented in a logical sequence to achieve maximum
desired results. The very first step in any business
acquisition effort is understanding some of the basic realities
of what to expect within the anticipated business procurement
process.
There are basic or “practical” assumptions and specific or
“subjective” assumptions one must make in every business
purchase effort. Practical assumptions can be best defined as
anticipated realities that make sense to understand no matter
the potential business transaction. Subjective assumptions are
anticipated challenges and events that correlate to your own
personal perspectives based firmly within your own purchase
criteria, prior business experiences, accumulated knowledge and
developed risk/reward tolerance levels.
Like most complex business challenges it is best to make some
fundamental assumptions about the task at hand. These
assumptions are not inclusive and are documented to facilitate
develop of more thoughts and ideas prior to implementation of
any initial step to find a business:
Assumptions to Be Made Before Searching for a Company
It is nearly impossible to find the “ideal” company to buy:
Compromises will abound throughout your search and negotiations
Not all companies are for sale:
Although, this is a common “opening statement” communicated by
an owner of a business you really like
Finding an acquisition candidate is a “numbers game”:
So many letters, calls, e mails and conversations result in
thousands of candidate companies defined, result in hundreds of
qualified candidates to pursue, result in ten’s of viable
companies to visit, result in one company that justifies a
formal purchase offer
The deal is done only when the check clears!
Like in any selling situation, the sale really is not completed
until you have 100% of the committed funds in hand. A business
purchase deal is only truly complete when the business seller
endorses your check for deposit … business sellers can and will
change their minds at any minute!
If you do not know what you really want to purchase you will
never find it.
Developing a clear, well thought out business purchase criteria
list will add a tremendous amount of efficiency to your
business pursuit process and significantly help all
intermediaries you choose to use to help you find your ideal
purchase candidate
If it is not in writing it means nothing:
Given the noteworthy amount of capital involved in business
mergers and acquisitions activities, coupled with all the
required evaluation steps needed to get a deal to final
negotiation, and all the people and associated support services
involved to get you there, it is always best to maintain a
“paper trail” and use binding legal documents to minimize
liability and “misunderstandings” along the way
It will cost you more than you anticipated:
Beyond negotiating an equitable price for the business you
eventually purchase, there are a variety of costs involved to
find, define, qualify and negotiate a business acquisition, no
matter whether you do a deal or not. Service fees, legal fees,
travel and entertainment expenses, market research publications
and industry consultant fees, to name a few “sunk costs”, can
really add up.
The more “creative” you are to find deals, the quicker you’ll
find the right deal:
The more diverse your means to locate viable companies for sale
the better your chances of finding a quality acquisition
candidate. Spread out your business candidate search resources;
utilize brokers, financial institutions, industry associations,
consultants, trade shows and websites to find your next deal.
You never know where your next great lead will come from!
Having a structured business purchase process in place to
maximize your time and capital will dramatically improve the
probability of finding a company that is for sale, reasonably
priced and meets most of your purchase criteria. Buying a
business does not have to be “psychological warfare” or a
stressful process.
Much of the success of buying a business will come from
documenting all your relevant thoughts, plans, processes and
challenges required to achieve your objectives. If it is
written down it can be improved upon, if it is not, it cannot.
Like trying to address any noteworthy business challenge,
whatever you can do to educate yourself on all the is required
to meet your desired outcomes, in advance of the tasks at hand,
the more effective you will be, the less it ultimately will
cost you to find the business to buy that was meant to be
yours.
About the Author:
Mark Smock is President of
, the
FIRST international business buyer directory of its kind.
Business Buyer Directory provides a non-traditional means for
proactive business buyers to locate businesses for sale
worldwide that meet their exact registered purchase criteria.
