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3 strategies to facilitate acquiring a business

06 October 2015 by National Bank
3 stratégies d'acquisition lors de l'achat de votre future entreprise

Acquiring a business is an enormous challenge. These three financial strategies will make the process smoother.

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1. Ask the seller to support you for a period of a time

If you are young, ambitious and ready to take over a business, it's likely that you want to do everything yourself. However, having the seller's support can be highly advantageous.

First, the seller can contribute to the financing by agreeing to be paid a portion of the sale at a later date. This way, the seller will still have a financial interest in the success of the business and be more motivated to facilitate the critical step of handing over the reins to the business.

By staying on for 12, 24 or 36 months, the seller can continue organizing files, which may have been neglected earlier due to a lack of time. In addition, by continuing to be associated with the business, the seller will show his or her confidence in the new ownership, a key asset when dealing with long-time clients and suppliers, as well as financial institutions.

To further motivate the seller, you could offer some type of compensation based on the business's performance. This could take the form of a bonus equivalent to a certain percentage of sales.

2. Arrange the seller's departure

While it may be useful to keep the seller with the business for a certain period of time, the opposite scenario might also be more appropriate.

This is often the case when the seller is perceived by the new owner as impeding growth because of a refusal to consider other avenues, for example.

Sometimes the seller is simply tired and no longer has the motivation needed to grow the business.

A typical example is one in which the new owner is the child of the business's founder or a part of the management team. If the new owner wishes to develop new markets within or outside Quebec, invest in equipment or buy out a competitor, the seller can become an obstacle.

Another common scenario is when a business is no longer able to develop as quickly as the market because the seller is hesitant to take the necessary steps to keep up with it.

In situations such as these, it's preferable for the new owner to come to an agreement with the seller that he or she will leave the business when the sale is completed.

To determine whether this is the right strategy for you, be sure to consult experts in the field and carry out a thorough assessment of the situation, particularly among important clients and suppliers. This will provide clues as to how to proceed and provide you with useful ideas from those who know your business well.

It may seem difficult, but arranging the seller's departure can have a positive impact on clients, suppliers and financial institutions.

3. Reasses what has to be bought or sold

A new owner is not obligated to purchase all of the business's assets.

A good strategy to ensure a successful transfer lies in evaluating each of the business's assets in order to determine what you would like to buy. If an asset does not fit with your plans or will not contribute to your success, it can be excluded from the sale or you can plan to sell it later.

Surround yourself with experts to help you assess the sale as you would an investment. They can identify new solutions to facilitate the transfer. For example, why not lease the building from the seller rather than buy it when you buy the business? Ask yourself the following questions: Are all of the business's divisions are a good fit for your plans or the current market? Is all of the equipment being used or required?

SURROUND YOURSELF WITH QUALIFIED EXPERTS

These three strategies can help facilitate a business transfer. Regardless of the strategy you use, the key is to obtain the assistance of experts who can advise you and support you throughout the process.

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