It is evident that smaller business owners sell their businesses faster without stress. In the business buying market, there are strategic buyers and there are financial buyers; the strategic buyer’s model focus on the return on investment or financials while the strategic buyers focus on partnership and long term objectives that is market or industry growth focused.
One thing that is sure in the process of buying a company is that good deals aren’t found, they are created. The “Nothing down buyer’s strategy” is being able to deftly avoid paying money upfront when buying a high ticket real estate product or business. This can be done through a combination of several cash-and –stack deal structures and strategies to influencing the buying process.
- Deferred consideration
Deferred consideration is a buyer’s strategy that involves minimum cash payment, and the buyer pays the balance from the profit of the business or in a later date. Or simply say, deferring payments through an agreed installment payment plan. These payments may be paid in cash, shares, debts, and or loan notes. This helps the buyer to reduce risk, bridge valuation gap and as well as retain key expertise of the company.
- Other People’s Money (OPM) using cash investors
In this case, the buyer offers return on investment to the seller and the seller remains in the business as a shareholder, other available options includes the buyer using other financing options like bank loans, angel investors, venture capital funding as well as other investment vehicles. However, the main buyer needs to provide personal guarantees incase of failed loans or investments.
One key thing that happens when the OPM buying strategy is used is that there is a great deal of equity dilution, and there will be debts to manage.
- Assets Splitting or Split-Off
It involves identifying and removing specific and valuable assets from the company being sold. This means that only the part of the company is purchased and not all its assets, which makes the value of the business to drastically drop. Buyers have the right to remove unwanted liabilities or assets in a business and then negotiate to buy only what they want. For examples, a buyer can buy only the intellectual property of a company and not other liabilities.
- Asset Financing
This is using the assets of the business to get investors or loans (this works like an asset financing strategy), thus, it implies using the money in the business to buy the business and a combination of two or more of the above nothing down strategy.
The truth is, buying a business requires some level of expertise, competence and strategies which can be learnt. Business owners need to gain knowledge on how best to buy other businesses or simply outsource to grow or sell their own business or to invest in other businesses.
Is there a particular business you are interested in buying, send a mail or call lets help you structure your deals.
Here at Dealpartners Africa, we structure deals, provide due diligence, valuation and compliance/license advisory service to make your partnership, merger and acquisition strategy seamless
we work you through the process and steps to achieve long lasting success. Call;0703 114 4700 or a email corporateservice@dealpartnes.africa . Your business success is our priority.
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