Best Practices in Searching for the (Near) Perfect Acquisition

Are you looking for that perfect business that you can buy for next to nothing, operate from the beach, make tons of cash and sell for millions of dollars? Look no further. Honestly, stop looking because there is no such creature. However, if you are serious about acquiring a good business (warts and all) that aligns with your skill set and that you will find enjoyable and challenging to operate, I have some ideas for you.

Searching for that near perfect business requires all the following:

  • Well defined search criteria. You must be crystal clear on what you want or you will waste valuable time picking up too many shiny objects.
  • High level of commitment. Without a serious time, money and energy commitment to the search you won’t be successful
  • Realistic expectations. In terms of company valuations, your own talents, and the businesses available make sure you are being realistic.
  • Risk taking. You will never buy a business if you can’t take reasonable risks.
  • Deep industry research. You will need to spend lots of time researching the industry of a company you are interested in.
  • Patience. It usually takes a qualified buyer up to two years to complete an acquisition.
  • Ability to make quick decisions. Good businesses will be lost by those who hesitate. Be able to pull the trigger quickly on a good business deal.

Understand that middle market companies will be offered synergistic buyers (i.e. businesses in the industry) long before being offered to individuals. By the time a mid-market company is offered to an individual. It will have been turned down by several businesses. This should put you on notice that there are issues with the business.

Methods of locating good businesses to purchase:

  • Register with the online listing services. You will get a plethora of businesses to look at. Most won’t match your needs. However, this can be good place to start and assist you in refining your search criteria.
  • Direct mail to companies that meet your acquisition criteria. Companies that aren’t “for sale” can make very desirable acquisition targets. Also, there is no competition among buyers and the businesses may not have been harvested of their valuable resources.
  • Contact all business brokerage firms in the area. Get all the business brokers looking for you. You won’t want to sign an exclusivity agreement. Therefore, most brokers will lose interest in you very quickly.
  • Contact accountants, attorneys, and bankers. Many times, these professionals know about clients that are contemplating selling before the businesses are on the market.
  • Work for a business broker. This may sound like a radical plan; however, it really works. You learn about the buying process and are in the know about businesses just put on the market. Also, you may earn a commission or two along the way.
  • Set up a website. The site can be very modest, but you should spend some money on the appropriate Google AdWords.
  • Search trade magazines and newsletters. Many have classified ads for members that want to sell.

Having the time to consistently stay on top of the market and analyze each opportunity can be the biggest challenge for many investors. Reach out to us to go over your ideal acquisition and see how we can help. Our expertise and connections will help expedite the process and ensure that you are getting the best deal possible.