There may come a time in life when a business opportunity presents itself to you. It may be a business that you’ve always admired and had your eye on. It could be a family business or that of a friend. Whatever the situation, the original owner may have decided it’s time to sell it and move on. If you’re interested, it could be the first step to a new life. You can be your own boss and run a company. There are many bonuses to this. You don’t have to worry about startup costs and getting it off the ground. Buying an existing business means you can simply step in and take over. Of course, it’s a little more complicated than that! If you’re thinking of buying a company, take a look at this first.
Get a business lawyer and accountant
Before you commit to anything, even verbally, speak to a business lawyer and an accountant. It’s really important that you understand and accept the deeper workings of the company. Although everything may look fine on the surface, you never know what’s lurking in the accounts. Seek advice from a lawyer and have a qualified accountant look through the books.
Consider buying the assets, not the business
This is becoming a more common tactic among business acquisition. In a business transaction, there are a lot of problems inherent in buying the company as a whole. You may inherit outstanding lawsuits, liabilities and owed expenses. You’ll also inherit tax rates that were set up years ago. Instead, buy all of the assets (equipment, machinery etc) and form a new company. You’ll get all the benefits, but none of the company baggage.
When you take over the business, you’ll want to make it as seamless as possible for the existing employees. Introduce yourself and communicate with them as well as possible. In some cases, you may want to look at enforcing arbitration agreements with the employees. This means that if any disputes arise during the takeover, they will be settled out of court.
Letter of intent
This is one of the most important aspects of business acquisition. This is the contract or agreement that you will draw up with the seller. Of course, your business lawyer will guide you through the process and advise you what to include. It should detail the terms and conditions of the sale. It will include the price and method of payment. You can include any specific terms necessary here. Some negotiation will probably occur at this stage.
Once you have taken over the company, you don’t want any ghosts from the past rearing their heads! An indemnity clause in the agreement should cover that. It’s an agreement that covers against a lawsuit from a previous client or customer. The clause will state that the previous owner will take responsibility for, and deal with, any lawsuits from the past. This works both ways and you’ll take responsibility for any problems in the future.
Finally, it makes good business sense to negotiate a period of transition. Ask the seller to help you through the first few months and conduct a seamless handover. If you’ve read and understood everything here, you’re ready to make an offer! Good luck!