We are seeing a lot of sales and purchases of established businesses at the moment, especially in the tourism and hospitality industries. Here we outline some hints and tips for making a successful offer to buy a business.
You may be keen to buy a business you have seen advertised online through a commercial agent, or learned about through private sale; how can you make an offer that stands the greatest chance of success?
This short article outlines points for you to think about before confirming your offer.
Who is the buyer?
If you have not done so already, speak with your solicitor and your accountant as soon as possible to discuss the best vehicle to use to buy the business. It could be that buying as an individual, or individuals, is not the way forward, depending on why you are wanting to the buy the business and who is going to be involved.
A lot of buyers decide that a new company (sometimes known as a special purpose vehicle), established solely for the purposes of acquiring and running the target business works for them. With your solicitor and your accountant, you will need to consider who will be involved in the purchase, both at the outset and as time goes by, about risk management, about funding and about tax planning.
How will you fund the purchase?
Linked to the above, you will be asked how you are going to finance the purchase and you will usually need to evidence this to the agent or the seller direct. 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 a cash buyer, and few buyers are wholly cash buyers, speak with your potential lender(s) sooner rather than later to understand exactly what their security requirements are going to be, timing and likely fees.
Any lender needs to understand the value of the business, including all property or properties used to trade, and any aspects that might adversely impact on value. Expect that a professional valuation at least will be required by a bank (if not by you), usually after your offer has been accepted, and allow sufficient time and cost for dealing.
Timescale for purchase
Be positive, and also realistic, in your own planning. Whilst all buyers will want to demonstrate that they can move forward without delay, you will need advice from your lawyer and lender as to how quickly you can exchange contracts.
It might be sensible to agree that you will do everything you can to exchange contracts as soon as possible, rather than committing to an exchange within ‘two weeks’ of the date of offer. That way you can be seen to be pushing forward, whilst not giving rise to expectations that you then cannot meet.
If you would like to discuss any of these points, and more, please do not hesitate to get in touch with our Cumbria and Lancashire Commercial law department. We will be happy to speak with you and can provide fixed fee advice and/or fee estimates as required.