How to make an offer to buy a business

Following an initial discussion and an exchange of non-disclosure agreements, you can request some outline numbers on the target company on which to base an offer.

You will have your own feelings on pricing and a corporate advisor will help rationalise these and construct an initial offer.

Overall consideration, payment terms and other matters will then be thrashed out (on your behalf by the advisor) and once agreed, Heads of Terms are drawn up and signed by all parties.

What checks need to be made on the company I am buying?

Following agreement on terms, the due diligence process begins. This is essentially an overview of the company that you are buying from a legal, accountancy and operational perspective.

On the accountancy side, the numbers upon which an offer was based will be challenged and things like compliance with the tax authorities verified. The process may also involve a review of the company’s working capital cycles to ensure that there isn’t an imminent financial black hole following completion due to seasonal trends or one off costs.

Legal due diligence will focus upon legal ownership and advising on the transfer of any affected employees which will all be used in preparing the share purchase agreement or SPA to be signed by both parties at completion.

More on acquisitions…

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