Acquiring an existing business is an opportunity for growth or even an avenue to consider for starting your own business. In either circumstance, it is important to understand what you are getting into and to be familiar with how to acquire a business. Some tips and guidance can help the business owner to conduct the acquisition.
It is important begin by conducting research into the company being acquired. The due diligence process can include a letter of intent proposing the price, terms of the purchase and conditions for sale of the business; a confidentially agreement; reviewing financial statements for the past three to five years of the business; reviewing the last three to five years of the business's tax returns; reviewing other important documents including employment contracts, customer lists and others; determining if the business has any leases or contract obligations; and enlisting professional help to review financial records and review, draft and execute legal documents.
It can be essential to have trained and knowledgeable guidance both during the acquisition process and also when running your business. It is also helpful to keep in mind when acquiring a new business that what it has built up, in the form of products, services and customers, can be useful and should not be lightly disregarded. Digital rights, including emails, passwords, domain names and social media accounts should be secured as part of the process.
There may be methods of reducing the purchase price, and securing financing if cash is unavailable, so it is helpful to be familiar with all options that can allow for the business acquisition to go through successfully. It is also important to ensure all licensing, permitting, zoning and environmental concerns are addressed and that the business is in compliance with necessary requirements. There are a variety of considerations to take into account when acquiring a business so understanding the process can be highly valuable for business owners.
Source: Inc.com, "6 Tips for Acquiring a Company," John Rampton, June 29, 2015