Buying a Business
How to Buy a Business
We help established businesses buy other businesses in the mid-market range. That’s businesses which sell for between $1 million and $50 million.
Simple as this may sound, you might be surprised at the complexity of buying a mid-market business.
We focus on helping mid-market companies acquire other mid-market companies because it’s fun, rewarding, and because it’s such a poorly served market. Quality, mid-market businesses are tough to find, hard to negotiate, and vital information is often challenging to uncover.
Someone who started, built, and has successfully run a business for 25 years or more may be hesitant to sell for many reasons, and the personal feelings of any or all of the owners can easily derail a deal.
As sell-side M&A advisors, we work with our seller clients to ensure that everything is out on the table because we’ve worked with enough buyers to know that anything hidden will, eventually, be found.
As a well-known an established CPA in Silicon Valley, I’ve been involved in countless mergers and acquisitions. I’ve known Kris Karlson for well over ten years, and in that time I’ve had the privilege of working with him on deals small and big, some exceeding $100M. I like working with Kris because I can always trust his judgment and advice. I know that my clients are in good hands, and will receive unbiased, honest assistance in selling or buying businesses. Kris has an uncompromising work ethic, a strict adherence to transparency in the process, and a keen insight into what works and what doesn’t. He’s creative, but with an attention to detail that makes for a smooth close. I highly recommend Kris as your M&A Advisor.
~Mr. Russell C. Filice, CPA -Filice Accountancy
Bringing transparency to the process is our key to success, both as sell-side advisors, and for you as the buyer. In this way, when we bring you a list of potential businesses, you’ll have all the pertinent information you need to make a quick decision.
What Do You Want to Buy … And Why?
In reality, you’re not buying a company. You’re buying either that company’s customers, their employees, or their profits… or, in the best of all worlds, all three.
Clarity and transparency up front is the key to success. Before we begin our search for a suitable business for you to buy, we’ll take the time to understand your company, your position in the market, your strengths, and your weaknesses.
We’re going to dig around to uncover what you want and why you want it. There are many reasons why you might want to buy a business, and when we understand what you want and why you want it, we can more easily find the best opportunities.
- Solve or fix a problem. It could give you technology you need, the expertise you lack, or a new customer base for your existing products…
- Open new doors. You could branch out into a new market, or offer an entirely new line of products to your existing customers…
- Create adventure, a new challenge, or fun. Acquiring a new business can present a wonderful challenge and a new adventure that keeps you engaged and alive.
Making the Best Decisions
Once we understand what you want and why, we’ll spend some time clarifying your requirements further. For example if you have just made significant plant and equipment investments and have excess capacity, a better company to acquire would be one that has not invested in plant & equipment. This will allow you to make a more competitive offer.
The deal is, we need to find a business that is a better fit for you than for anyone else, which allows you to make a competitive offer, and which enables the Seller to feel good about the deal, Understanding this fit is what gets deals done and is what we enjoy the most.
Thus, a key component of our advisory services includes helping you to understand how and why businesses are valued the way they are so that there are no surprises when we come to you with potential businesses. We do the dirty work, dig for a good fit, and ask the tough questions of the sellers… and then we bring the perfect deal to you for your approval.
Let me give you a different perspective. As one who buys businesses for a living, I can’t think of a better team to work with than Bowman/Hanson. In the 13 years I’ve known Kris and Eric, their combination of creativity and honesty never cease to amaze me. I trust that what they tell me is true, and this makes my job as an investor a thousand times easier. ~ Mark Marth, Leading Media Group
What’s a “Good Deal”?
A “great deal” on paper could spell disaster in reality if the problems the company has can’t be easily solved with your existing employees, knowledge and technology.
Conversely, that same great deal might be a major score if your in-house expertise can quickly solve whatever problems the selling company is facing. If you have the best sales force and they have a great product or service, but do not know how to sell, that may be a great candidate.
And just because a competitor is for sale doesn’t mean you should buy the business. You can see examples of this all the time in big Wall Street deals: HP and Compaq, Daimler Benz/Chrysler, Excite/@Home, JDS Uniphase/SDL, Mattel/The Learning Company…
A big part of our job as advisors includes showing you how the kinds of businesses you might want to buy are valued, and then helping you to see if, or how, buying those businesses will impact your company.
Bringing Transparency to the Selling Process…
Because there are many things that can cause a deal to fail, we do our best to uncover potential issues before we bring you a business.
The seller may not understand how a business is valued, so may be asking for more than the business is worth. More importantly, valuation issues for Sellers typically relate more to personal circumstances than the market value of their companies.
We focus on the personal reasons the Seller wants to sell his or her business. This is what makes deals close or not close. We have seen many 75-year-old owners back out from a deal at the last minute, saying “it’s not enough money,” when in reality they’re simply not interested in retiring.
Deals may also fall through because of problems that crop up during the due diligence process, so we mitigate or avert those issues by getting everything out on the table early, and pursuing issues as they arise, rather than allowing them to fester.
Our focus on transparency – bringing everything to light early and often – is what makes us so successful. If you are to work with us as buy-side advisors, you can expect that.
We’ll say when we think a business is good for you, and we’ll say when we don’t believe it’s in your best interest. And, when we do bring you a business to examine, it will be one which meets the detailed criteria you and we specify.
When you know what you’re looking for, why, and how that acquisition will fit into your existing business, you’re in a much better position to negotiate on price and terms.
Then, when you understand the true value of the businesses, you won’t waste time on deals that are a poor fit, or over-priced. You make your money on the deals you walk away from
What Next?
If you’re a business owner looking to expand or supplement his business through the acquisition of other businesses, then the obvious next step is to talk with us.
We’ll explain how the process works, and how our M&A Advisory services can help you to find the right business or businesses for you.
You may also want to read the following articles on this site. Although many are written from the perspective of selling a business, the information will help you to understand how businesses are valued, and how the selling process works.