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Buying and Selling a Business

What are the essentials of buying or selling a business? There are common aspects and aspects exclusive to the buying and selling sides. This section touches on some of the critical issues. It is not exhaustive and is not intended to be a do it yourself M&A kit.

If you have not bought or sold a business before, this article will de-mystify the process and lead you through the thought processes required. It will give you ideas and insights and help your early-stage planning.
COMMON ASPECTSThink:
* Used cars. What do you do when you are thinking about buying or selling a used car? Do those things (figuratively speaking) for the business to be sold/bought (Target).
* Tax and accounting V both can have huge effects on the commerciality of the deal and its structure. Typically, what is good (in terms of structure) for the seller is bad for the buyer and vice versa. Take tax and accounting advice early.
* Assets or shares V you can acquire the Target through either vehicle. Tax and accounting matters will probably determine which is best. Again, sellers and buyers often find that their desires are opposed in this aspect of the deal.
* Valuation V there is a difference between value and price. The buyer may see the opportunity to develop the Target and thus value it extremely highly. His object will be to minimise the price so as to maximise that value. The seller is advised to try to figure out the value seen by the buyer and push the price up accordingly.
* People V if people are employed in the Target, then they will have rights which must be addressed.
* Customers V they are the life-blood of the business and so must figure large in all aspects of the deal.
* Suppliers V they help to pump the life-blood so must be treated nearly as well as customers.
* Organisation V a sale/purchase has a dramatic effect on the Target, the buyer and the seller. Do not underestimate these effects. Think them through an plan to deal with them.
* Negotiation strategy V how will you negotiate and what will you negotiate on and about? It is not as simple as I want 10, Ill give you 5, Lets settle at 7.5. I will write another article on negotiation soon.
* Timing V these things can take much longer than you expect. Think of a period and then multiply by at least 2, probably 4.
* Confidentiality V the parties can have lots of interesting chats and discussions about the Target. Masses of critical information can be given away. Take precautions BEFORE you start to talk.
* Contracts V English law allows for the creating of oral contracts. That is, there is no need, typically, for any written evidence. There just has to be sufficient proof of agreement. All the chats and discussions referred to above can amount to that proof. Years ago, Texaco was driven into Chapter 11 in the USAbecause of unguarded, unregulated negotiations. Do not let it happen to you.
* Files V the amount of paper you will accumulate in the course of the deal will be astounding. You need an organised filing system. In the worst case, it may save you from the problems foreseen under Contracts above.
* Costs V this article is being written because of concerns about this. The costs can mount up. You can keep them down by being organised and prepared and by doing a lot of work yourself. Let the experts guide you and let them do the bits that need expert help. Do not let them do donkey work - hire a donkey, its cheaper.