Buying a company
When acquiring an active company, you also get its customers, reputation, business concept and supplier network. You may find a suitable company yourself or use a company broker or other parties. You can seek funding from banks, Finnvera or private equity investors. Before concluding the acquisition, find out about the condition and value of the company and check the risks associated with the purchase.
Buying an active company is a complex process, especially if you do not have any previous business experience. You should acquire basic knowledge of entrepreneurship and financial matters before making the acquisition decision.
Select a company whose business would be supported by your own skills and expertise. The risks associated with entrepreneurship are reduced when your concentrate on a sector in which you already have experience and knowledge.
Examine closely the future prospects of the sector you have selected and the competitive situation facing it. By doing this you do not need to buy a company that is at the end of its life-cycle or that has a poor reputation.
Acquiring an active company is a major investment. Find out early enough where you can find financing for the purchase.
When acquiring an active company, you also get its customers, reputation, business concept and supplier network. This helps you to get quickly into business. In most cases, the former owner also guides and supports your during the early stages.
You can find help for the acquisition process from your regional business development company, company brokers and legal experts.
Before selecting a company, analyse carefully what kind of a business you would like to buy. Think about such matters as the sector in which the company operates, its business idea, location, customers and products. Think about your own economic objectives concerning the company and how much you could invest in it. You should also decide whether setting up a business would be a better idea than buying an active one.
After you have determined what you want and prepared concrete criteria on their basis, you can start looking for suitable companies. Use your networks and check lists of companies for sale in such places as the internet.
You may also find a suitable company with the help of company brokers, your regional business development company and ELY Centres. You can also prepare a sales ad and distribute it in suitable channels, such as the internet.
After you have found potential companies, collect information on them from different sources. Also study the financial information on the companies. If possible, also visit the companies to get an impression of how they operate. Make comparisons between the companies and search more information on the most interesting firms.
Remember to secure the funding for the company acquisition well before you make the purchase offer. If the seller accepts your offer, you are also expected to buy the company.
You can pay the purchase price with your own funds or with the assets of your own company. You can also seek investors among the people you know, among external business angels or private equity companies.
You can seek credit from a bank, insurance company, other financial institutions or Finnvera. You can also seek guarantees for a bank loan from Finnvera. Note, however, that in most cases, you can only get a loan if a specific proportion of the purchase price is paid from your own funds or the assets of your company.
You can also agree on a longer payment period with the seller. This makes it easier to borrow money and repay the loan.
Sometimes you may buy the company in parts (one part now and the rest at a later date). In that case, you should agree on a detailed payment timetable and arrange the funding accordingly.
Check that the seller actually owns the shares of the company or that the seller otherwise has the right to make decisions on the company. If necessary, conclude a letter of intent on the rules observed by both parties in the purchase.
Order a due diligence review of the company from an outside expert. It usually reveals the condition of the company and the risks associated with the acquisition. Most of the risks concern ownership, permits and licences, taxation, agreements and contracts.
Do not hesitate to ask the seller about the smallest details that you need for decision-making (such as the reason why the owner is selling the company). Examine carefully the company's financial statements and other documents.
Use experts to valuate the company and determine a suitable purchase price. The price depends on whether you are buying the whole company or only its business operations. Buying the business operations only may be more advantageous in terms of taxation. If you are only buying the business operations, you should specify what is included in the purchase.