When purchasing a business, numerous issues can impede the deal’s closing. The seller may decide to withdraw, or due diligence may uncover some problems in the company that you did not anticipate.
In the complex minefield that is the process of acquisitions, your objective as a buyer is two-fold…get the best business at the best price and close the deal in a seamless manner.
Those who are new to acquisitions can quickly learn that it is possible to get to the finish line and be left with more headaches.
A team of the right people can allow you to purchase a business with far less stress during the process of the acquisition and after the closing.
Professionals Needed On Your Team
Who will you need to hire during the acquisition process? I always suggest consulting with an accountant, attorney and business broker.
Let’s discuss why you require these three experts and what to look for when selecting someone to assist you with acquiring them.
Accountant
A professional accountant is responsible for accounting duties, including accounting analysis, auditing, and analysis of financial statements.
Here are the main tasks that an accountant can assist you with during the process of acquisition:
- Determine What You Can Afford: An accountant can review your financial situation and a credit report to establish what kind of business you can afford, the amount you can afford for a down payment, and the size of a loan you can get.
- Conduct Financial Due Diligence: An accountant will review the business’s financial health by analyzing the financial statements to confirm the accuracy of valuation, establish forecasts for the future, and assess the risk to the buyer.
- Review Tax Implications: If a company is being sold as an asset or purchased of shares, it has clear financial implications for both. As a buyer, you can take advantage of tax deductions from those who buy the business. A good accountant will help help you understand the tax implications of buying a business and how they affect you.
How to Vet an Accountant
Consider these factors when looking for an accountant to assist you in purchasing a business:
- Specializing in M&A: Find out whether your accountant has experience purchasing and selling companies. It is ideal for them to know both. Sure, accountants specialize in preparing tax returns, yet have yet to gain any prior experience in the sale of businesses. There are two distinct worlds with different specificities.
- Explains Concepts Easily: A good accountant isn’t only an individual who handles accounting tasks. They are a respected advisor who can explain the financial and tax environment to you. It is essential to choose an accountant you feel comfortable with who can help you understand the complexities.
Lawyer
A mergers and acquisitions (M&A) lawyer aids clients in drafting legal documents, performing due diligence, and acting as a trusted advisor.
Here are the main tasks that a lawyer can assist you with through the process of acquisition:
- Drafts Legal Documents: An attorney will create and negotiate documents such as the Letter of Intent (LOI) and Asset Purchase Agreement (APA) primarily, but they can also make additional documents required like a non-compete agreement and vendor contracts as well as confidentiality agreements and employment contracts.
- Negotiate the Purchase Terms: An APA isn’t a simple contract that transfers control from the vendor to the purchaser. The warranties, representations, covenants, and disclosure schedules might be pertinent if issues were found in due diligence. An attorney can help you draft these conditions and others necessary to conclude.
- Conducts legal and due diligence: Lawyers obtain all necessary information from the seller and review existing business agreements, permits, and organizational documents to ensure that the company complies with the law. This information can help you comprehend the deal’s significance, value, and risk.
How to Vet a Lawyer
These are the items you should look for when looking for a lawyer to assist you in purchasing a business:
- They are Specialized in M&A: Lawyers involved in the acquisition process must be acquainted with income statements, balance sheets, and other accounting and financial issues. A solid tax and economic background is vital to comprehend the process thoroughly and can assist a lawyer in identifying relevant concerns to safeguard your interests as the purchaser. Lawyers are different; you’ll want a lawyer with previous M&A expertise.
- Isn’t a “Deal Killer”: Lawyers are notorious for identifying issues and causing an impasse between the parties. But when the time comes for an acquisition, the aim is to ensure you finish the deal, and you’ll want an attorney with the same goal. The lawyer you choose should identify deal-killers in due diligence, but they aren’t the deal-killers.
- Level-headed and Trustworthy: The presence of a lawyer who you believe in is essential. They can offer an authoritative voice amid a situation where emotions may be heightened. Expert M&A lawyers can assist clients in remaining focused on the goal in mind and help them figure out how to deal with any obstacles that arise
Business Broker
A business broker is an intermediary that helps clients when buying a business. They aid sellers in valuing their businesses at an affordable but competitive cost, do the necessary work to promote and sell the business to buyers and assist in guiding the transaction from beginning to finish.
Here are some of the roles a business broker will assist you in the process of acquiring:
- Communicates & Negotiates: The broker acts as a liaison between the buyer and seller, and their goal is in line with yours to take the deal over the line. Brokers can help smooth any issues and help negotiate compromises between the buyers and sellers. In contrast to lawyers, brokers can communicate directly with the seller and buyer, efficiently advancing the transaction.
- Value the Business: An integral part of the acquisition process is establishing an enterprise’s fair market value. A business broker can do this by looking at the financial statements of a company as well as cash flow models that are discounted and then comparing the results with similar businesses which have been sold. A skilled broker can land at a fair price, which will please the seller while also creating buyer interest.
- Search for Other Opportunities: The business you’re examining may be different from the one you close on. However, keeping in touch with brokers is crucial to help you locate other deals that meet your requirements. Having someone looking closely at the listings before and after they hit the market is beneficial.
How to Vet a Business Broker
Here are some items you should look out for when working with a business advisor to assist you in purchasing an enterprise:
- Communicative & Responsive: From the first contact with the broker, do they appear accommodating? A professional business broker should quickly reply to prospective buyers, be patient in answering questions, and guide you in the steps required to get started as a buyer.
- Making Sure it’s a Fit: A good business broker should help you evaluate the deal not just from a valuation perspective, but also consult with you to make sure that the business is a good fit for you as the new owner. Finding a broker who wants to help you succeed in the long-run makes for a much better outcome.
