Buying a Business
Buying a company or business is probably the most critical and complex decision you will make in your entire life. Therefore you have to be well informed and advised before making the momentous decision. You can structure the purchase by following a few necessary steps and completing different stages that will allow you to carry out this process in a satisfactory way.
Suppose you haven’t identified the company you want to buy yet. In that case, you can get access to a multiple list system through any official Business Brokers lists such as the BBF MLS, where you will have the chance to check a variety of opportunities and pick the ones you think would fit better your needs. Once you have identified the business you would like to buy, we’ll help you follow the necessary steps:
1. DETERMINING A FAIR PRICE
Clearly, the purchase price is critical in determining whether you end up with a good deal. In instances where you’ve already identified an acquisition target, but have little insight as to what should be the price to offer in return, then you should recruit an appraiser, accountant, Business Broker, or another valuation specialist to assist you. Once you’ve determined the value of the target company, you will be better positioned to decide which cash amount or other consideration you would like to offer the seller, whether at a discount, market price, or a surplus. Ultimately, your offer will be based on your liquidity, bargaining power, and risk tolerance.
2. DEAL STRUCTURE
Although there are various creative ways to buy a business, there are three basic structures that are the most common: merger, stock purchase, and asset purchase. Each of these choices has different layers of complexity and varying tax and liability consequences.
3. LETTER OF INTENT (or non-binding Purchase Agreement):
It is a document outlining the understanding between two or more parties that accounts for their intend to formalize in a legally binding agreement. The letter of intent is (typically) a relatively short, non- binding letter of agreement signed by both parties that details the essential deal points for the transaction. The LOI should include the purchase price, a description of the deal structure, due diligence requirements, the partieS’ expectations concerning the purchase agreement, the anticipated timing for the closing, and any other material details agreed upon by the parties. The LOI is non-binding in that neither party will be able to sue the other if the final transaction structure ends up not precisely mirroring what is outlined in the LOI, or if the deal fails to close altogether. It is intended to serve as a good faith roadmap so that both parties can comfortably move forward with the confidence that they’re on the same page.
4. CLOSING CHECKLIST
Right after the LOI is signed, you should put together a closing checklist, a list of every document, instrument, or action that must be completed, signed, or delivered in connection with the closing. This list should be regularly updated and shared with the seller throughout the process so that there is complete visibility as to expectations and outstanding action items. As such, the closing checklist is the most crucial document in ensuring that the transaction is consummated as smoothly as possible. It’s highly advisable to ask the seller to put together a Data Room where you can compile all the documents needed for the Due Diligence.
5. DUE DILIGENCE
Is the investigation or exercise of care that a reasonable business or person is typically expected to take before entering into any agreement or contract with another party. In other words, it is an examination of anything and everything about the target company that could create any liability for you once you’re the new owner. You have to conduct a comprehensive review of the business legally, operationally, financially, and commercially.
For example, the checklist should include any required consents from the buyer’s and seller’s landlords, customers, suppliers, stockholders, the board of directors, creditors, or other third persons. If conducted thoroughly and appropriately, your due diligence process will include a review of all contracts to which the seller is subject, including any provisions in those contracts that would mandate the counter party’s consent to your transaction.
6. CLOSING
Corporate attorneys consider the closing to be when consideration is exchanged, and transfer of ownership occurs. Each item on the closing checklist should have been completed. You should be ready, willing, and able to deliver the purchase price. The seller should be prepared to provide any required stock certificates, documents, or instruments to effectuate the transfer of ownership legally. The closing can either be done in person or remotely, so long as all documents and instruments are entirely signed and exchanged.
Consulting in Business Startups
We help business owners and entrepreneurs in new ventures startups
STARTUP VALUATION
We perform a valuation of the new company using different approaches such as Discounted Cash Flows, Cost-to-Recreate a Model and Market Multiple Model. You can read about different methods of business valuation here.
BUSINESS PLAN DEVELOPMENT
FINANCING OPTIONS
Debt Financing with Commercial Banks (SBA, EXIM Bank)
and/or LendersEquity Financing with PEG
Grants
TURN KEY PROJECTS
Freight Forwarders
Commercial Business
