How to Buy a Business

If you are wondering how to buy a business, Axis Partnership can help. With over 25 years experience of buying and selling businesses, it does not matter whether you know exactly how to buy a business: with our specialist knowledge and experience to draw on, and with us acting on your behalf, we can assist you through the process of finding the right type of business to invest in, approaching suitable business and negotiating a deal.

However, it always helps to have an overview of the buying process, so here we show you how to buy a business in 13 steps.

How to Buy a Business in 13 Steps

1. Identify the Sector
A buyer will generally have an idea what overall type of business they are looking to acquire, to fit their existing portfolio or to match their existing skills. Axis has companies for sale in the following broad sectors: Healthcare, Recruitment, Property Management, Commercial Cleaning, Packaging, Logistics, Service Businesses and Manufacturing & Engineering. However we also have a range of other unique businesses up for sale at any one time.

2. Identify Geographical Location
A buyer will also need to decide where they want the business to be located. Sometimes this is for logistical reasons (e.g. to be reasonably close to existing sites or services), and sometimes for portfolio reasons (e.g. to expand into a new region). Axis is involved in selling businesses throughout the UK and can target businesses in a specific area as required by a buyer.

3. Locate Matching Businesses
The next step is to identify businesses which match your requirements. This may involve searching business listings for businesses currently up for sale. Alternatively, it may involve identifying businesses that are not up for sale but which may be approached to see if they are interested in selling. Axis is able to perform this step for retained buyers – see below for more information about this process.

4. Confidentiality Undertaking / Non-Disclosure Agreements
To protect the target company, buyers are required not to disclose the identity or any information about target companies before any significant information about the company is revealed to them.

5. Assess the Business
The target company needs to be assessed by the buyer (or by Axis on the buyer’s behalf) to find out whether the business is a good match, but also whether it is a good investment. We look at aspects such as history, client base, staff breakdown and assets owned. A valuation of the company will be carried out at this stage if it has not already happened.

6. Establish Finance
The buyer holds discussions with funders (e.g. banks, private investors, venture capitalists) to ensure that finance is in place and to agree relevant deal structures.

7. Make an Offer
The buyer can now make an indicative offer for either 100% of the issued share capital or the goodwill & assets. Axis will typically mediate this stage, feeding back responses and taking the negotiation forward.

8. Issue Heads of Terms
Once a verbal offer is agreed, written Heads of Terms are drawn up, putting the deal in writing for both parties to inspect. Axis will generally draw up Heads of Terms and will assist both sides in reaching an agreement, modifying the deal as necessary until both sides are happy and ready to sign.

9. Instruct Solicitors
Once Heads of Terms have been signed and an exclusivity period granted, solicitors and advisors can now be instructed to draw up detailed contracts.

10. Carry out Due Diligence
The buyer now needs to carry out detailed checks regarding various aspects of the target company. This includes detailed operational, financial, legal and property audits and requires the target company to make all relevant information known to the buyer.

11. Issue Draft Sales Purchase Agreement
Solicitors issue contract for agreement.

12. Ensure funding is in place for Completion
Make final arrangements for funds to be in place on completion date.

13. Sign Documents and Complete
Contracts are signed and exchanged and a completion date set.

To Buy or Start Your Own?
Buying an existing business has several advantages over starting one from scratch. Firstly, you will start to recoup your investment immediately from business which is already up and running – a new business may take years to show a return on investment. Secondly, an existing company will have a client base for you to work with and build on – a new business may take some time to attract its first clients. Thirdly, an existing business will have proven that it can survive and is providing a product or service for which there is demand – new businesses have a high chance of failure.

How Does Axis Partnership Help a Client to Find a Business?
We help prospective buyers in two ways. The first is simply to register your details with us, telling us the type of business you are interested in. We will then notify you whenever new businesses matching your requirements come up for sale.

However, if you would prefer to seek out companies more proactively, we can do so on your behalf. We have agreements in place with our retained buyers to locate businesses matching their requirements. We develop an in-depth profile of their requirements, including sector, geographical location, turnover range and price constraints. We will then approach companies matching these requirements via direct mailings and telephone. With Axis acting on your behalf your confidentiality is maintained until both sides are ready to agree a firm offer. We will discuss the valuation of the target company and agree an indicative offer to propose. Only if both parties feel the valuation and offer is in the right area do we proceed to arrange meetings to discuss logistics and finer details. This saves a lot of time on both sides. We will then draft the Heads of Terms and act as mediator to negotiate any final points, and oversee the sale through the legalities to completion.

For more information on How to Buy a Business click here to contact us, or register your requirements with Axis Partnership