Buying a Business

Buying a business is a big step, it can be extremely lucrative or by varying degrees a disaster. Assuming that you have already found a business 'Mortgagehunters' is happy to assist and support you to complete the purchase.

Having approached the vendor, displayed your integrity and ability to purchase the business, the vendor will need to accept you are the best suited purchaser. The next step is to establish that the business being offered is indeed worth what is being asked. It is important to ensure there are no hidden surprises awaiting you as the new owner.

Preliminary Due Diligence

'Mortgagehunters' can help to:

Establish that the business has no major problems by helping in the process of "Preliminary due diligence". We assist by selecting appropriate "Experts" to help you get a feel for the concern.
Accompany you to visit the business and asking searching questions to establish whether the vendor is hiding key information that may affect the value.
Help you establish if financial information is credible. However at this stage do not expect to have too much access to the business or information.

Professional Advisers

We can assist in selecting professional advisers, such as Accountants, Solicitors and valuers, and help design their brief and negotiate fee levels.

The Initial Offer

Having established Preliminary Due Diligence and selected appropriate advisors, now is the time to make an "Initial Offer".

Make your own analysis of the financial information. Identify how/if efficiency can be increased.
Consider the Risk involved - has the business got assets worth less than your offer?
Does the business rely on a small number of customers?
Establish the current and past profitability.
Does the business carry any significant debt?

Then calculate your Initial offer and your Maximum offer. Understand that the Price may not be the vendor's top priority.
There may be other competitors also making offers.

Submit your offer in a concise formal letter ensuring that it is 'Subject to Contract' implying no commitment. Emphasise the positive points of your offer. Chase up the offer, clarifying any outstanding issues and ask for evidence if the vendor is playing you off against another offer, they may not exist.

Don't forget that most lenders will only consider actual asset value when calculating how much they will lend to towards the purchase. If there is a significant element of goodwill in the valuation you may need to contribute a higher proportion yourself.

Head Terms

Having had your initial offer accepted it is now time to agree on head terms.
Specify exactly what you are buying.
Set out and agree the payment structure.
Agree a period of exclusivity.
Detail any preconditions, e.g. certain financial results or sales performance.
Agree on warranties or indemnities on previous commitments.

Detailed Due diligence

Having agreed Head Terms you should now be allowed access to the business. A thorough examination should be conducted. Establish the status of the customer base by contacting them. Meet and speak to suppliers for their views. Analyse in detail all historic information to establish its credibility. Ensure that all financial information is accurate and credible. Check on the last audit and ensure the balance sheet items are accurate. Conduct an employee audit. Complete Legal due diligence to confirm the status of the business, and the ownership of actual and intellectual assets. Examine contractual obligations.

Final Terms

Detailed due diligence will have now put you in a much stronger position to negotiate the Final Terms.
You will have established the strengths and weaknesses within the business. This will enable you to point out the weaknesses and re establishes a lower offer.
Be reasonable but strong with this negotiation and ensure that there is continuous dialogue even if things get awkward.
Then Close the deal

Completion

Announce the change of ownership quickly and implement your action plan for the business immediately

'Mortgagehunters' can assist you at all stages of the process to ensure a successful purchase.

The products and services promoted here are not part of the Openwork Logo Offering and are offered in our own right. Limited accept no responsibility for this aspect of our business. These products are not regulated by the Financial Services Authority.