Buying a BusinessThink
* Has the car been tarted up? What is the polish and bright chrome hiding? Get the equivalent of the AA or RAC to give it the once over.
* What are you buying? A customer list; know-how; technology? Ensure that you will get it. If the customers are not bound by long-term contracts (at least a year), then will they come? (See below for more on customers.) If the know-how resides in someones head, how will you acquire it? Is the technology really owned by the seller? Once you have figured out what you are really buying, you may decide that there is a better, cheaper way of getting it.
* People English (and European) law tends to pass the employees in the business to the buyer, whether it wants them or not. There are a number of serious issues to be considered here. Take expert advice about them.
* Customers are some of the sellers customers already yours? If so, will your business double on purchase or will those joint customers decide to keep their eggs in separate baskets and find a new, competitive supplier? Will all customers continue to trade with the buyer? What is the level of repeat business in the target company? High tends to be good, low tends to be bad unless there is a rational explanation. Ensure that customers are kept informed. They will worry about their security of supply. Reassure them, comfort them, make them stay with you.
* Suppliers as for customers. In addition, think about improved buying power.
* Non-compete you do not want the seller setting up next door and using the proceeds of sale to set up a new, competing business. English law is strict about non-compete agreements. Take advice.
* Post-acquisition structure acquisitions often under-perform, relative to pre-acquisition forecasts, because of a failure to plan for the integration of the new into the existing. Culture, management style, duplication of workforce, incompatible IT systems, different house styles, logos, paper, etc, etc will all appear within the weeks after completion. You should seek them out in the period before making the final price agreement. A 50,000 IT refit post closing is, in effect, a 50,000 addition to the purchase price. How painful would that be?