Navigating the pitfalls of buying a business

The acquisition of an established business should be the key to success, but buyers should approach a transaction with a healthy scepticism to ensure they don’t suffer unnecessary risks.

Inaccurate valuation

Sellers are keen to secure the best price possible and often overstate the value of their business. Obtaining professional advice on value and deal structure will ensure that the business is bought for the market value.

Hidden liabilities and obligations

Taking comprehensive, commercial legal advice can identify and mitigate potential risks such as pending lawsuits, tax, environmental, or contractual obligations which may not have been disclosed during negotiations.

Declining performance

A prosperous business can quickly deteriorate due to changing market conditions. Considering the most recent performance, including work pipeline and prospects, will give an indication of sustainability when compared to the historical numbers.

Cultural and organisational integration

Merging two distinct corporate cultures and managing the transition can be complex and disruptive to the workforce. Developing a well thought-out integration plan that addresses differences in culture will ensure a smooth transition for all stakeholders.

Financing and capital constraints

The funding markets are dynamic with funders regularly changing investment criteria. Taking professional advice will ensure that you obtain the most appropriate funding structure for the transaction.

Customer and supplier relationships

Developing a robust customer retention strategy and establish transparent lines of communication with clients and suppliers will help to address the risks where customers and suppliers have established loyalties to the previous owner.

Employing the knowledge of a corporate finance advisor, will increase your chances of a successful and rewarding venture.