What is it like to throw your hat in the “buying a business” ring?
Gary Van Sistine, Business Intermediary
The road toward potential ownership is not for the faint of heart. After researching a variety of companies, finding the right broker to work with, setting aside time to visit the selected business – sometimes more than once, the real work begins. The buyer will submit a letter of intent. With the help of the broker, the buyer will then be given financials to review, probably with an accountant. If the business is large, there will be pages of documents to consider. A savvy buyer will ask questions about the workforce, study blueprints, consider specific inspections that need to be done, maybe even meet with officials from the municipality and “check out the neighborhood.”
This period of due diligence is crucial in the understanding of what the business is all about and will help determine what price and terms the buyer will negotiate with the seller. This is also the time when the buyer will talk with his lender about how the sale would be financed.
Because this may not be a fast process, there is always the chance that other buyers have been looking at the same company, have done their due diligence and are ready to submit an offer. When our perspective buyer has invested weeks or months of time in his attempt to purchase a company, the last thing he wants to hear from the broker is, “They’ve accepted another offer.”
If the seller does accept another offer, our buyer might want to wait and see what happens next. After all, he obviously thought this was a great business to buy, and he has already invested time and probably money into the process. While it’s not the norm, it can happen that transactions fall apart before closing.
Sometimes inspection results cause buyers to pull out, or they can’t get their financing. If that happens, the broker will call his or her buyer to say, “The offer has gone south,” (or whatever clever words he uses.) “Are you ready to jump back in?” If our buyer was willing and able to take a “wait and see” position, he will now be poised and ready to proceed with even a bit more leverage for his offer.
Call or text me if you’re thinking about buying a company. We can talk about the ins and outs of a business sale transaction. Right now, I have distribution, manufacturing, landscaping, and bar/restaurant offerings to tell you about, and I’d enjoy talking with you!