|Key Takeaways from “Insiders Secrets to Buying a Business” Seminar|
- Assemble your transaction team early – In order to effectively buy a business, the panel strongly recommended that every buyer utilize an accountant, attorney, banker, and business broker. Assembling a team of experienced and trusted professionals early on in the process allows buyers to quickly and efficiently move forward once they find the right opportunity. Moreover, having a team of experts allows buyers to bounce ideas and questions off of subject matter experts.
- Get your financing lined up before making an offer – Prior to making an offer, having a plan for financing not only helps buyers craft their offer, but it also gives assurance to sellers that a transaction is likely to be completed. Finding a banker who understands the range of financing options available and who will also will make a trusted long-term partner is critical to getting the right financing in place and to having ongoing success after the transaction is closed.
- Be ready to ask important questions – A lot of qualitative information such as the seller’s motivation, growth opportunities, key employees, and the company’s history should be explored by buyers. The numbers need to make sense to make an acquisition, but the qualitative information all needs to point towards a “go” as well. Having a knowledgeable business broker on your team is greatly beneficial, as they can ask the tough questions of anyone involved in the transaction at anytime.
- Work with your accountant to develop a tax strategy – Determining what legal structure a new entity should have, how to determine asset allocation, and optimizing transaction funding strategies are all critical in order to minimize current and future tax liabilities. Do not make the mistake of overlooking the significant tax consequences of a purchase or sale.
- Understand the purchase agreement – The price is a small part of the final purchase agreement for a sale. Be sure to work with an attorney who can advise you on what should be included and excluded from the purchase agreement in order to protect you and your business. Additionally, be sure to retain an attorney with transactional experience, as having an attorney who can effectively represent you and help get the deal done is of paramount importance.
- Avoid common mistakes – The panelists put forth some items that have caused deals to fall apart. Some of the items included: unrealistic pricing expectations, inaccurate financials, lack of non-compete agreements with key employees, messy corporate structures, and owners not in agreement about what they need and want from a sale. The panelists recommended that buyers ask about these items prior to submitting an offer.