The Purchasing Progress from the Buyer’s Perspective

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The Purchasing Progress from the Buyer’s Perspective

Buying a business can feel like running a marathon. You go through months of mayhem to purchase the business and then once you own it, you essentially have to run another marathon to learn the business you just acquired. It is difficult to appreciate how much goes into buying a business and the time it takes. If you don’t know much about the buying process it can be extremely stressful for first-time business acquirers. Once the business acquisition has closed, it is important to reflect on the process it took to get there. As the purchaser, the stress comes from asking and answering thousands of questions, having endless, tiny, negotiating points to deal with (and some significant deal-killer negotiation points) the emotions of it all, potential financing setbacks, unfavourable findings from due diligence, and of course the immense time that it all takes. If this is your first time acquiring a business this is your reality for up to six months, which is a significant amount of time, energy, stress and unknowns as you approach closing date. It is almost impossible to prepare a purchaser for the business buying process. Experience matters.

Size Matters

The size of the business being acquired makes a difference. A small business is often easier to purchase because there are less moving pieces. The buyers are usually less experienced and are likely to overlook some of the details that might hold more experienced buyers back in the acquisition. With larger businesses there is more information and more sophistication that comes with acquiring a million or multi-million dollar business. A buyer has to dig into every aspect diligently. It becomes daunting for many first-time buyers to know what they need to ask of the seller when they’re acquiring their business. As the saying goes, “You don’t know what you don’t know”. It is very difficult if you have never bought a business before to know all of the seemingly unknowns in the process.

A Represented Seller = Hope for a Smooth Closing

There is hope that if you are a first-time buyer and the seller is being represented by a merger and acquisition advisor the process of buying that company will be a little better. If the owner has never sold a business before, they won’t know the process any better than the first-time buyer knows the process. It may seem counter intuitive, but having an advisor on the sellers side will enable the buyer to obtain the right information that is accurate, fact-checked, and presented promptly. This gives rise to a smoother flow of information, more prompt communication, and the detail that any buyer would need when asking the questions about the business. It is better dealing with a seller who is represented because you know the information is accurate.

Also, knowing that the seller is represented allows the buyer to appreciate how serious the seller is in selling, as opposed to the owners who respond with, “If the offer is high enough, then sure, I’ll sell my business.” If they are being represented, it’s a telltale sign they are serious and will take your inquiries seriously. Knowing the process you go through is very important for understanding what to expect.

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Jarrett Davidson is an experienced entrepreneur and corporate finance professional with significant strategic and operational roles within companies he owns and advises on.

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