Buying a business that is already established may be a faster and more simple process than starting a new enterprise from scratch. From companies advertised through commercial agents to those discussed through private sales, how can you make sure that your offer stands the greatest chance of success? With Progression Solicitors experiencing a sharp increase in the purchase and sale of existing businesses, particularly in the tourism and hospitality industries, company Director and Head of Commercial Property, Nicola Wood LL.B outlines some key hints and tips for making a successful offer to buy a business.
Buying a business | who is the buyer?
Speak with your solicitor or accountant as soon as possible. This is the first step towards identifying the best ‘vehicle’ to buy the business. It may be the case that buying as an individual, or individuals, is not the optimal solution. This can depend on why you will buy the business and who it involves. In some instances establishing a new company, sometimes known as a ‘special purpose vehicle’, can be the right choice. The purpose of this company is solely to acquire and run the target business. It may seem overwhelming, but it’s important to understand exactly who will be involved at the outset and throughout the process. This can help you make the best decisions about risk management, funding, and tax planning.
How will you fund the purchase?
Just like deciding who is the buyer, you also need to consider how you are going to finance the purchase. The agent or the seller may require you to directly evidence this. This means providing written evidence that funds are or will be available prior to exchange of contracts, with an understanding of how those funds have been attained. If you are not making a solely ‘cash purchase’, which very few transactions are, you should speak with your potential lender(s) as soon as possible to understand what their exact security requirements will be. They can also give you more information about timings and fees associated with the purchase.
Any potential lender needs to understand the value of the business. This can include all property or properties used to trade and any aspects that might adversely impact its value. It is usual for a bank to at least require a professional valuation of the business. This will often happen after your offer has been accepted and you should allow sufficient time and cost for dealing with it.
How long will your business purchase take?
It is important to be positive, but also realistic in your own planning. All buyers want to demonstrate that they can move forward without delay. It’s important to get the right advice from your lawyer and lender as to how quickly you can exchange contracts.
A good option might be to agree that you will do everything possible to exchange contracts as soon as necessary. This gives you more flexibility than if you committed to an exchange within ‘two weeks’ of the date of offer. This make it clear that you are pushing forward, whilst not giving rise to expectations that you cannot meet.
If you’re thinking of buying a business and would like to discuss any of these points and more, don’t hesitate to contact our Commercial team on 01524 889850 or at firstname.lastname@example.org. Our specialist team will provide you with the insight, expertise, and advice to make your business purchase as hassle free as possible with fixed fee advice and/or fee estimates as required.