man buying a business

How long does it take to buy a business? A Comprehensive Guide

There is no set time frame for buying a business. It depends on things including the seller, the buyer, the professionals on either side of the deal, and what you buy.

Some businesses are large and complex; others are smaller and more straightforward. You can reasonably expect it to take less time to buy, say, a corner shop than a chain of grocery stores.

That said, there are similarities in the stages involved in buying a business of any size that mean it is possible to look at them and consider what’s involved and roughly how long the process should take. We can identify potential bottlenecks and hurdles, and consider how to ensure things keep moving along. If we don’t do that, the process becomes endless!

Selecting the Ideal Business for Acquisition

This is a key step. If you know you want your own business but don’t have a clear idea of what you want to buy – and why you want to buy it – you can waste huge amounts of time looking at businesses out of curiosity rather than with intent. That might be interesting, but it is unlikely to get you to a situation of business ownership.

Start by knowing what you want to achieve. Are you buying a business to give yourself a job? Is it to provide an income that only requires you to work a few hours a week? Will your first acquisition be the only one, or the first in a series of mergers and acquisitions that allows you to put together a substantial group – which you then sell for a healthy profit, perhaps to private equity?

Once you pin down why you are buying a business, you can move on to what to buy. Your choice is likely to be driven by what you know or can learn, what you are interested in, and your track record. When you identify your sector, you need to do some research. What does the market and the competition look like? Is demand burgeoning or contracting? A further consideration will be funding – how you will pay for the business and the costs associated with buying it.

When you understand the fundamentals you can pull together a business plan, which funding providers will want to see, especially if you are buying an existing business for the first time.

Navigating the Business Acquisition Path

Assuming you have set out the criteria and have no concerns about a lender funding the purchase of an existing business, we can break business acquisition down into five key steps: find a business to buy; conduct initial discussions and sign heads of terms; conduct due diligence; renegotiate the purchase price and terms and draw up the sale and purchase agreement; complete on the purchase.

That makes the business purchase process sound like an easy linear process, and it can be – but things can happen to upset the applecart too. Let’s take a look at those stages.

Find a business to buy

The key to entrepreneurs finding a small business to buy relatively quickly is deal flow. The more options you have to choose from, the better the chances you will find the right business for you, and the more discerning you can be.

You can find a small business to buy in a number of ways: via a business broker; through specialist listings; via your network; or by writing to businesses that seem suitable and asking the current owner if they are considering selling up. If you take the latter route you can either compile a mailing list by doing your own research or else you can buy a list from a professional body or list broker.

Conduct initial discussions and sign heads of terms

Once you find a good business opportunity, your initial discussions with the business owners should let you know whether you have a chance of striking a deal – and whether you want to. Never be afraid to walk away if something doesn’t feel right.

Assuming everything is fine, make an initial offer and get heads of terms signed as quickly as possible. Don’t get hung up too much on this and certainly don’t let lawyers start arguing about the finer points at this stage; not all of the conditions are legally binding, and the chances are as a result of due diligence at least some of what is in heads of terms will change. Think of it as a letter of intent. The key clause for you is exclusivity, so you know you aren’t in a race with other potential buyers. Sign an NDA if necessary.

Conduct due diligence

Due diligence may be done on a number of fronts, the most common being financial, legal, and commercial, and the results will firm up the business valuation.

Are the finances of the business as expected? Is the cash flow sufficient? What liabilities are there?

What about legal aspects? An existing business has history; are there any ongoing disputes, for example?

And what about contracts the business holds with clients, especially key clients; are they invalidated by a change of ownership? What happens then?

All these things need to be investigated so you fully understand what it is you are buying.

Renegotiate the purchase price and terms and draw up the sale and purchase agreement

Due diligence benefits the buyer; the best the seller can hope for is to maintain the status quo. When due diligence has been conducted, the business is looked at with fresh eyes.

It may be that something is discovered that adversely affects the valuation, so you revise your offer. Perhaps something has the potential to cause problems after completion, so you add in warranties and indemnities. This is all standard stuff; allow your professionals to deal with this on your behalf – they know how to handle it.

Again, don’t be afraid to walk away if you can’t reach an agreement that suits both parties. That might be the trigger needed for the seller to reconsider, or the action that saves you from overpaying or making some other mistake you ultimately regret.

Complete on the purchase

Everything is agreed, the funding is in place and you are due to complete the purchase of your new business – and things can go wrong right up until the last moment. That doesn’t mean the sale won’t go ahead, but you might find that completion takes an extra day or two while matters arising get ironed out. That’s not unusual.

Factors Influencing the Acquisition Timeline

There are all sorts of issues that can affect the acquisition timeline. Most can be counteracted by keeping on top of things, but some can be terminal.

Say you have asked to see the accounts but the seller’s accountant keeps making excuses; you can ask the seller to apply pressure on your behalf.

Say you get to the stage of drawing up the sale and purchase agreement but the seller’s lawyer is dragging their heels and nitpicking over details; you can get together with the seller and decide on those things, then offer it to the lawyers on both sides as an agreed deal.

Negotiating new property leases can be very time-consuming – but if you need the property to operate the business, then that time has to be absorbed. Start that negotiation early in the process so it runs alongside other tasks, and always read the small print.

Say the seller is holding things up and you discover they have serious doubts about selling; you can try to convince them they are making the right decision but ultimately it’s up to them, and if they pull out, the deal is gone. Sometimes they just can’t let go of the business.

While things can be scuppered through no fault of your own, by keeping on top of things you keep the deal moving forward. If you don’t nudge things along, the deal could fall apart due to neglect.

Effective Management of the Acquisition Timeline

There are business acquisitions that have been completed in days – and others that have taken years.

The business acquisition timeline is impacted by whether you are making a share purchase and buying the business as a going concern, or just acquiring the assets of the business. Clearly the latter option is less complex and therefore faster.

Whatever type of purchase it is, establish and maintain a friendly relationship with the seller.

Trust the experts. You will be relying on professionals to complete at least part of the due diligence process for you, so trust them to do their job. You should, however, keep on top of progress.

Before you pick up the phone or walk in to a meeting have an agenda, an objective and a fall-back position. Make negotiations timebound and keep to the point, or they run the risk of being very pleasant chats but rambling on and achieving nothing.

Keep good, clear notes of everything that happens. Especially if you are speaking to more than one potential seller; it’s very easy for things to get confused.

Don’t be afraid to walk away, at any stage. Sometimes even inexpensive businesses are bad deals.

Navigating the Business Acquisition Process in the UK

Be aware of your obligations to, for example, HMRC and Companies House.

Have the professionals who will help you lined up in advance and call on them as needed. They will make sure you abide by the law.

Expediting the Acquisition Process

Sometimes things take as long as they take and we just have to accept it. Other times, there are things we can do to speed matters along.

Being properly prepared before you start looking for a new business helps. Know the size and type of business you want to buy, and understand why you are buying a business. Set appropriate goals, criteria and red lines, and assess businesses against those. That way you won’t waste time on something you ultimately don’t want and will regret buying. Even if you pull out of the business purchase before completion, you will have spent time and possibly money.

Access the help of professionals wherever possible. For example, if your preparation results in you wanting to buy an optician in a specific area and with turnover within a set range, you can go to a broker and get them to produce a list of businesses that fit the bill. That’s much faster than you trawling through listings or doing your own research on the subject, and you know you’ll be only making contact with potentially suitable businesses.

Be prepared for any conversations you have with the business owners. Set a time limit on the discussion and know what you want to get out of it.

When it comes to due diligence, choose professionals to help you who understand your criteria and red lines. You’ll likely want an accountant to check financial statements and a lawyer to check existing legal documents and draw up new ones, and possibly other professionals depending on the nature of the business.

Keep on top of things and don’t be afraid to ring up your lawyer or the seller – or anyone else involved – and ask them what’s happening. This is your deal; you need to control it.

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