When and how to conclude or withdraw when buying or selling a business

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Any contractor with experience in buying or selling selling a business knows that deals fall through all the time. Worse still, many have to look back on a deal they made with that, in hindsight, probably should have happened. Knowing when to make a deal and when to retire is more art than science, but it can be critical to the future success of your acquired business. But how does selling a business really work? And how do you know when it's smarter to walk away? Let's take a closer look.

Close the sale of a business, step by step.

The real work begins once you've reached a general agreement on the sale of a business acquisition. The sales process can be a little confusing for the uninitiated, so let's take a look step by step:

• Letter of intent. The buyer will draw up and sign a non-binding purchase contract called a letter of intent. This letter describes the conditions of the sale, including the agreed price.

• Necessary checks. Buyer and seller will do their job necessary checks to investigate and research the other party. This stage is particularly important for the buyer, as it may show signs that the transaction is not to his or her liking.

• Financing. Unless the sale is a cash deal, the buyer must obtain financing, either from a bank or through the seller.

• Purchase agreement. Assuming the buyer secures financing and neither party finds anything disagreeable during the due diligence process, a purchase contract will be executed. The purchase contract will describe the sales price, financing details and any additional agreements, such as non-compete clauses or confidentiality agreements.
• Close the case. The final stage of the process requires all participants to sign the purchase contract and any other sales agreements.

Depending on your level of experience, this list may seem simple or downright complicated. In most cases, you'll have a commercial broker, a lawyer or both to help you through the process. Probably the most important step in the process is step two: due diligence. It's easy to get carried away by the thrill of a sale or acquisition, but this can be a costly mistake. Here are some signs that it's time to step away from the negotiating table and away from a deal.

Signs that it's time to move away from a deal

1. Inconsistencies - Since one of the most important aspects of corporate due diligence is the review of financial, legal and business records, it's important that any inconsistencies are thoroughly investigated and discussed to your satisfaction. Don't sweep things under the carpet, and don't let the current owner stop you from getting to the bottom of anything that isn't in perfect order. If you don't get a satisfactory answer, walk away.
   
2. Neglect - Most business owners put their business up for sale only after careful consideration and a firm decision. Once the decision has been made, it can often be months or more before the right buyer appears. During this interim period, some owners will consciously decide not to "waste" any more time, effort or money creating and maintaining the business they have already decided to sell. Depending on how long it has been on the market, this neglect may become apparent, and the buyer should be aware of it. If major renovations are required, the cost of the acquisition may not make sense. If you can't rectify the cost of the business with the amount of money you'll have to invest to get it back into shape, stop.

3. Undisclosed problems - Whether it's a tax lien the current owner didn't mention, an expired inspection on a key piece of equipment, or any other detail the buyer has a legitimate right to know, if the owner turns out to have tried to cover (or simply ignore) a problem before the sale, warning bells should be ringing. Ask yourself: why is this owner really selling the business? If the answer makes you think twice, walk away.

4. Poor credit rating - This isn't a guarantee, as some business owners simply aren't great money managers, but if their due diligence results in a low credit score or troubled lending history for the business, it could be a sign that Otherwise, positive financial statements could be artificially propped up. up. If the company's finances aren't in order, stay away.

5. The industry is in decline. - Sometimes, smart business owners choose to sell because, after years in the industry, they may notice significant changes on the horizon that could cause big problems for their business. Of course, it would be detestable to inform a potential buyer of this fact, so it's up to the buyer to consult other industry experts to ensure that the outlook remains positive. If the outlook is negative, walk away.

These are fairly general lists, and certainly not exhaustive. But the point is clear: while strategic planning and preparation are essential to identifying an excellent business opportunity in the first place, it's also vital that potential buyers remain alert to any signs of trouble throughout the buying process.

That's not to say that all businesses turn sour. In fact, most don't. Your next deal may not reveal anything that would cause you to consider walking away, but you need to be prepared for that eventuality. In some cases, walking away from a possible deal is the best you can do. There's always another deal on the horizon.

One of the best ways to avoid a southbound agreement is to work with a team of sales experts who can help with veterinary research opportunities and can catch items you'd otherwise lose. This team could include a business broker, commercial real estate agent, lawyer and accountant, as well as niche industry experts appropriate to the specific business you're considering.

With your help and your own keen sense of detail and instinct, you should be able to pass on the bad offers until the good one appears.