In a meeting I had today with a purchaser, he made a comment that reaffirmed to me the mindset any business purchaser should adopt in any market. “I want to buy a business, not be sold one”. This means to me that a buyer completes a transaction where he/she has complete involvement and understanding of each of the stages of the purchasing process.

How is this achieved from the purchaser’s point of view? Listed below are my thoughts and recommendations on how a purchaser can purchase a business and have a better understanding of the process.

1. Adopt the mindset that you are going to go out and purchase a business rather than being sold one. This is a confident, not arrogant approach, you have done your homework, and you have the buy-in of your family, have the backup that you require, so you can now enter the market on the front foot and purchase a business.
2. Begin networking. Meet the Brokers that you see advertising regularly, or have a good web presence. Interact with the large accounting & legal firms that have M&A divisions and see what is available and who is offering what.
3. Set a time frame that you would be happy with to purchase the business and then relax and look at all opportunities on their merits with no time pressure.
4. Meet face to face where possible, have a coffee and put a face to the name that you are dealing with. Traffic might be a nightmare, but a business is an investment so investing some time meeting in person with the “players” in the market place is a good use of that time. There are generally more buyers than sellers in the market so be remembered by meeting face to face.
5. Analyse the methodology each of the companies use in appraising and positioning their offerings and get comfortable on what methodology you would agree to when you get to the buying part of this process. There is no point dealing with a company using a methodology that you disagree with because you might never come to an agreement on a sale price.
6. When looking through Information Memorandums, talking to brokers or business owners avoid the hype. Hype generally is a smoke screen; business is not like purchasing a home where emotions are involved, so stick to the fundamentals of the business as it is today and when evaluating its future prospects.
7. Keep your financiers in the loop; let them look at what you are looking at, when you are looking at it, not once you have put an offer on it. They can give you very valuable feedback on what they require and what they are willing to finance, also it gives your banker better buy in on the transaction early so he/she can better present the lend to the Credit Department. This will save time in the Due Diligence period.
8. Get a second banking option. You may have a long term relationship with your bank but it never hurts to have a plan B. The Banks have different appetites for different categories and their policies change according to their balance sheets, so your loyalty could be misplaced if you don’t shop around. If there are two Banks looking at your application this will not only offer you a better chance of success but should result in better terms and conditions on the final offer you accept.
9. Keep the broker up to date with your thoughts on the opportunity they are representing. There can be very different interpretations of the information you have been provided with and often purchasers or the advisers can make inaccurate assumptions that could mean you walk out on the opportunity. An experienced broker will be able to put you right and get verifiable information to your advisers to also give them comfort.
10. Move efficiently through any process. Time kills deals at any stage so don’t dither. Good businesses don’t stay on the market long, and more often than not the first mover gets the prize.
11. Now that you have looked at some opportunities ask yourself what type suits you. Are you looking for a start up, a growth business, a steady performer or (in this market) a distressed business? Each of these should be valued differently and each requires a different skill-set in an owner. I agree that you may think that you have all the skills for all these opportunities, but what would you enjoy the most, what would be the best use of your time and what would you offer the most value to?
12. Get past the numbers. Leave the numbers to your accountant and identify the intangible assets of the business. Market awareness and acceptance of the product/service, systems and processes, staffing, leases, new markets and opportunities. None of these are on P&L or Balance sheet but all should be measured and evaluated.
13. On day one of the Due Diligence investigation meet with the broker, the business owner and both accountants if possible and set a plan. Who is going to do what, when and where information is to be provided, book when meetings and site visits etc will be held, and stick to it. The broker should be the mediator and it is his/her responsibility to keep everybody on track. Good communication lines with everybody adhering to their agreements offers the transaction the best chance of success.
14. Listen to all your advisers, read their reports and recommendations but make the final decision yourself. Business is about mitigating risk because there is always a risk in business. Is it a risk worth taking? That is a question only you can answer, so you should answer it.
15. If you have answered yes, then plan for the transition carefully. The time between satisfying your DD investigation and possession date is time well spent planning to make sure that the Vendor’s period of assistance agreed in the contract gives you the best opportunity to transition the business. Use it wisely.

In conclusion, for you to buy and not be sold you need to “buy in” to every stage of the purchasing process. Be on the front foot throughout, make a plan and stick to it as best you can all the while moving in a timely manner with open lines of communication to all the parties. Good luck and you will hear from me next week.