Almost everything is for sale, and most things can be negotiated, bartered, and bargained down to a price that suits you. It is becoming more common for successful business people to buy already running businesses instead of going through the start-up phase.
So if you want the short, sharp guide to buying a company (preferably with management buyouts), read on.
Photo by Adeolu Eletu on Unsplash
Strategy
All good business people have a strategy – and here is one place where it needs to be solid. You need to decide why you want to buy other companies; what will it bring you currently? The answer to that question will be what decides your strategy.
Keeping in mind that the fastest way to grow your company is to acquire a new one, here are some reasons you might decide to do it:
- Markets: if the new company has access to markets, you don’t
- Personnel: if their personnel is highly skilled
- Market share: buying your competitors gives you a bigger market share
- Technology: buying a new company with better technology (or patented tech) is faster than developing your own
Team
You’re going to need a few people to run point on the acquisition because too many people can ruin a great deal – while not enough might mean you don’t have the right people on board.
You’ll need people from HR, legal (or hired legal), financial/banker, executive, PR, and IT.
This is the minimum that you’ll need in most cases to ensure you have covered all your bases.
Research
Due diligence will give you all of the information you need to make sure this is the right move. You’ll see the other companies’ books, hiring and firing, records, and more. The first check will be everything that is public, and the second will be management meetings, the finer details, the culture, and checking out their staff.
Negotiations
There will be the first offer after you have done the due diligence and everything appears to be in order. Most offer your first offer will be under what the company might be worth – as a starting point.
Often the first offer should be around 75% of the company’s worth; however, you need to be mindful to not go too low. It’s not just the company you are buying, it is the people in it, their contacts, their network, and everything you stand to gain from buying them.
Terms
The end goal is to be able to add the business you are acquiring to yours. And, there will be several negotiations that will be difficult. You might not feel one of the management is worth the price, but they might be a package deal.
You should be looking for a win-win for both parties here (while still getting what you want and need from the acquisition).
Contract
Once all of the details are ironed out, you will get a contract drawn up – and these are still up for negotiation too. So expect conversations to be lengthy, and plenty of them.
The acquisition is just one way that you can grow your company, but here are a few others: How Can You Grow Your Business?.