Buying a business is an extensive undertaking. First of all, you have to be clear about whether and which company you want to buy.
Once this has happened, it is time for complex negotiations and talks. There are a few things to keep in mind.
You don't have much time to read? Here are the most important aspects of buying a company at a glance:
- As banal as it sounds: First and foremost the question of whether you should buy a company
- For the purchase there are Various options and purchase objects; the right choice is crucial
- It makes a big difference whether they are a start-up or a Buy a long-standing company; whether they buy a craft business or a care service
- Please also note our Guide with 11 useful tips and advice
Table of contents
- You don't have much time to read? Here are the most important aspects of buying a company at a glance:
- Basic questions
- Why buy a company instead of starting one yourself?
- Do I want to buy shares in a company or buy the whole company?
- Am I an entrepreneurial type?
- What kind of company do I want to take over?
- Do I want to conduct my search nationwide or regionally?
- Can I finance a company purchase?
- Where can I find offers for a company purchase?
- Do I try to do it alone or do I take M&A advice to support me?
- What are the challenges and opportunities?
- The decision has been made: How to proceed with the company acquisition?
- 1 Create search profile
- 2 Selection of a target company
- 3 Address company owners
- 4 Talks and negotiations with the transferor of the business
- 5 Company valuation
- 6 Clarify financing
- 7 Letter of Intent
- 8 Due diligence
- 9 Company purchase agreement
- 10 Transaction (signing, closing)
- 11 Post Merger Integration
- The checklist for business successors
Before the Company acquisition There are a few questions that you should listen to yourself to answer. An honest answer is important in order not to regret the business succession later on.
Why buy a company instead of starting one yourself?
Buying a business instead of starting one can have many advantages: An existing business usually has the important basic equipment and a going concern. Both Fixed assets, employees as well as suppliers and customers. In addition, a existing The company is already established in the market and presumably in a stable position. Even if it is economically struggling, it still has a "foundation" with which to drive development forward.
Moreover, modernisation with investments is often easier than setting up a new business ? and also cheaper.
A Company succession usually leads to profits more quickly than a newly established company.
Do I want to buy shares in a company or buy the whole company?
This depends on both the personal desire and the type of business. Small and medium-sized enterprises are mostly sold as a whole unit. The buyer is then often the managing director at the same time. In the case of high purchase prices or sellers who want to transfer their life's work very securely and slowly, a shareholding is more likely to be considered. The further options, up to 100% takeover, can then already be contractually fixed with the first tranche.
This has the advantage that the buyer is not immediately solely responsible, the purchase price can be financed more realistically and the Companies generally not economically distressed are. However, the disadvantage is also that he has to coordinate important actions and decisions with the existing shareholders and tends not to be the sole manager and decision-maker in the company.
Am I an entrepreneurial type?
Basically, anyone can become an entrepreneur. But Not every person brings the optimal disposition for entrepreneurship with. It is important to be extensively informed and to choose the right companies as a purchase option. For this, one can turn to an appropriate M&A consulting contact. This also helps in assessing whether you have the optimal personality for a takeover and Company succession possess.
Discover where your strengths lie with our scientifically based entrepreneur check.
What kind of company do I want to take over?
This, too, cannot be named across the board. However, it is good to be clear about it beforehand. For this, one should know one's knowledge and skills and be clear about what one wants to do in the future. The more precisely the buyer is clear about which company fits his competence and personality profile, the more precisely the search can be designed.
Contract negotiations are also easier when you have has given sufficient thought to the purchase of the company beforehandis optimally prepared strategically and enters the process with clarity.
Buy craft business
When it comes to the succession of a craft business, one should ideally possess the corresponding craft skills. Depending on the size of the business, the partner or owner may also be required to actively participate in the trade itself. Even in the case of large company structures in the skilled crafts sector, the buyer's know-how should already be available from the seller's point of view, and sometimes there may also be a requirement in the area of master craftsman's qualifications. In terms of pure management of the employees, it is certainly good to have the appropriate expertise and professional experience. This way, one can judge their work much better and, if necessary, act as a role model.
Attention: In Germany, some professions are subject to the so-called master craftsman requirement. For example, you cannot run a car repair shop or a bakery without employing someone with a master craftsman's certificate or you have to provide this qualification yourself.
Retail business takeover
If one takes over a retail business, excellent staff management is necessary and a high affinity to sales itself. Depending on the structure and size, the majority of employees then decide on turnover and success vis-à-vis the end customer. In this industry, the entrepreneur also has to perform many different tasks with different knowledge. This is especially true for business models in retail that have organised their sales ONLINE and OFFLINE.
Take over car dealership, care service or property management
In these cases, a wide range of competences and a serious demeanour is required throughout. Technical knowledge, empathy and social skills or organisational know-how. These industries particularly thrive on the Acquiring new customers and customer care. One should master this if one wants to buy such a company. Because as a manager, one must definitely be able to deal with the customers and lead employees to their performance in such a way that the satisfaction of the end customers is always guaranteed.
Do I want to conduct my search nationwide or regionally?
This is also something that everyone has to weigh up for themselves. Am I willing to relocate for my new job or can the business model be successfully managed remotely? In many cases, the company should have a location that is easily accessible and where you can be on site frequently.
Because especially with the fresh business succession and also for some time afterwards, it is a great advantage to get to know the employees that sees through precise structures and shows a lot of presence. Only then can the smooth running be ensured. Moreover, only then can one find approaches for modernisation and restructuring.
Can I finance a company purchase?
Definitely, yes. It will hardly be possible for many, future entrepreneurs to buy a company without a certain amount of outside capital. Unless you are very wealthy or the price is extremely low.
If you have a Good business plan and between 10 and 30 % of own financial resources in the amount of the purchase price, the forecasts are correct and there is a good credit rating.financing the company is usually not a problem.
Is it possible to buy a company without equity?
A Take over a company without equity capital ? this possibility exists, but is difficult to implement. In most cases, you then need a separate investor or business angel. or investor who also takes on entrepreneurial responsibility. This allows the equity capital for the business succession to be increased. This is because both loans and funding largely require a personal contribution and collateral.
For smaller companies, the equity ratio should be at least 15 - 20 percent. For larger companies it can be somewhat lower and varies depending on the business model.
Where can I find offers for a company purchase?
If you want to buy a company locally, you can contact Industry associations, banks, the Chamber of Industry and Commerce and Chambers of Crafts turn to. Many entrepreneurs who are looking for a successor turn to these agencies.
There are also various exchanges on the Internet where a company can be anonymously advertised for sale. Entrepreneurs who are looking for a suitable company can also post a search profile there. Then potential sellers can become aware of this search profile themselves.
If you want to search for a company throughout Germany, two to three portals are relevant: The Nexxt-Change exchange, Dub.de or Kern-Unternehmensnachfolge. From free of charge to a mandate, companies and investors can find a serious and active platform here.
The following applies: The more precise the buyer's search profile, the greater the chance of finding the right project. Sellers themselves also pay relatively close attention to ensure that a buyer is not looking for everything and believes he or she is suitable for everything without any knowledge of the industry.
M&A corporate consultants help in the search for a suitable company to buy. Regionally as well as Germany-wide or internationally.
Would you like to buy a company or acquire a shareholding? You will find the right offers on our company exchange.
Do I try to do it alone or do I take M&A advice to support me?
In principle, anyone interested in buying a company can of course try it on their own. However, it should be borne in mind that buying a company is a very complex undertaking and that the market changes daily. In order to consider all aspects, a Support from an M&A consultancy makes sense. This person provides support in all matters and gives helpful tips. It also ensures that all the necessary points are considered in detail. Thus, the risk of business succession is significantly lower.
Learn how to make a company purchase a success in our company purchase guide.
What are the challenges and opportunities?
The takeover of a company brings many challenges. A suitable company must be found and the financing must be clarified. In addition, a smooth handover with the seller is of great importance. Therefore, one has to deal with the seller in detail and integrate both sides with a win-win strategy.
This can be difficult at times. As one also takes over employees, the social component must also be taken into account and bonding communication is one of the most important tasks with the takeover.
The But challenges are also opportunities at the same time. After all, you are taking over an already existing company. If all things are taken into account during the sale, the handover is carried out thoroughly and smoothly and the employees are involved accordingly, you have created a good basis for a successful company.
The decision has been made: How to proceed with the company acquisition?
1 Create search profile
The more precisely Company acquisition the more targeted the search profile can be. If you enter the search profile on the corresponding exchanges on the internet, you will receive a notification when something suitable has been posted by a seller. In addition, potential sellers can also contact you directly when they see a corresponding search profile of the buyer.
2 Selection of a target company
The target company for the company purchase should fit well with one's own wishes and ideas. The financial aspect is also important, of course. Therefore, one should be really convinced of the company and its future direction. After all, this be continued successfully and profitably.
3 Address company owners
The first contact with a company owner is also the first impression for both sides. And it should be well prepared. First, go into the company, the business model and the history of the transferor and seller. In addition to a phone call or video call, try to meet the seller in person as soon as possible to get an appropriate impression of the entrepreneur and the company.
4 Talks and negotiations with the transferor of the business
These form an important basis for the actual company purchase. Everything must be right for both sides. It is therefore advisable to conduct these discussions with appropriate advice. Then it can be ensured that everything runs professionally and important points are not forgotten. In addition, the management consultancy can also provide important tips and also help to evaluate the interviews afterwards. A good advisor can ask a lot of uncomfortable and critical questions. The prospect himself is then more likely to stay in a good connection with the seller.
5 Company valuation
The company valuation is the basis for setting the purchase price. Often the ideas of the seller and the buyer diverge.
Among other things, this is because the seller also sees a high emotional value in his company. Of course, the buyer lacks this.
That is why it is important to have a Determine goodwill that is as objectified as possible. This can be done, for example, using recognised valuation methods such as the IDWS1 capitalised earnings value method. Online calculators mostly give a rough indication in the first step and are based on market values without being able to take into account the special features of a company in each individual case.
It therefore makes sense to seek the support of an M&A management consultancy at this stage of the process. This can help to determine the value of a company. This happens mostly with the capitalised earnings value method or in the craft sector also according to the AWH procedure.
6 Clarify financing
Before signing the purchase contract of a company, the financing must be clarified in detail and written commitments of the financing partners must be available. There are no reliable results on demand. The seller himself can also support the financing structure with a loan. So-called Earn Out Clauses help to generate a partial purchase price from both sides in the future.
Basically: The more precisely one has dealt with the company, the better the financing can be clarified with banks or savings banks. Only a resilient business plan, a convincing personality on the buyer's side and possible support through subsidies will help to bring the overall project into reality.
Equity refers to the company's own assets. Having a certain amount of equity is almost always the basic prerequisite for a company purchase. Without personal liability and without own collateral or money, financing becomes a big challenge.
Funding can be provided through regional providers (varies from province to province) and nationally, such as the KfW Bank or Guarantee banks, take place. There are various support programmes. Which programmes are current in which regions and offer the best possible support must be considered on an individual basis. However, the funding agencies can help with the appropriate selection.
It makes a lot of sense to take advantage of a subsidy, as it usually offers better conditions than the classic loan and can even reduce your own capital.
In most cases, funding requires a certain equity ratio to the project. In addition, a Business plan submitted and "sold" very convincingly. Also Forecasts about the company or the industry outlook increase the chance of receiving funding.
In most cases of purchase price classes in the lower, single-digit million range, outside capital is classically borrowed from the bank. As a rule, certain collateral must be available in order to obtain a loan.
Here too are a good business plan and forecasts about the development of the companies necessary in most cases. In addition to the "classic" banks and savings banks, there are a number of modern financing providers that even work exclusively online and are also happy to deal with takeovers in the context of a succession.
A shareholder loan is also a loan. However, it can be counted as equity and thus helps with further financing. Seller loan or loans from shareholders can often earn attractive interest rates, offer unscheduled repayment options and help to present the company powerfully to the outside world.
Example of what funding might look like
A company costs 500,000 EUR. There is EUR 75,000 equity capital available (equity ratio of 15 per cent).
So EUR 425,000 is still needed.
A grant in a specially promoted region amounts to 200,000 EUR. After that, another 225,000 EUR are needed. This can be taken out as borrowed capital/loan from a bank. Especially the house banks and savings banks of the company that is to be bought are an ideal contact for the following buyer of the company.
7 Letter of Intent
The Letter of Intent (LOI) is a non-binding letter of intent between the buyer and seller of the company and will be from a due diligence process.
This confirms that both parties are negotiating the conclusion of a contract. The Letter of Intent is in most cases also the basis of the contract and should very precisely record the purchase price structure and other details at an early stage. However, it does not establish any legal claims.
8 Due diligence
Möchte man ein Buy a company, gibt es viele Aspekte zu berücksichtigen. Man benötigt einen Überblick über die gesamte wirtschaftliche Situation des Unternehmens. Auch Legal, economic and tax aspects must be examined.
This comprehensive examination is called Due Diligence is the term used. Due diligence is a risk assessment carried out with "due care". It contains important legal, organisational, financial and tax aspects. In individual cases, other checks such as environmental issues may also be added.
The seller usually compiles all the required documents and information so that the buyer can carry out the due diligence.
Of course, the buyer must observe confidentiality and non-disclosure. This can be done accordingly secured by a Non Disclosure Agreement (NDA) become.
9 Company purchase agreement
The Company purchase agreement is the contract that regulates the transfer of a company or part of a company or the sale of shares. In this are all economic and legal aspects of the acquisition included. It is better to regulate more, rather than too little in this contract. It helps that both sides can get along peacefully in the future.
10 Transaction (signing, closing)
Signing refers to the conclusion of a contract. Both parties thus sign the company purchase agreement. The closing is the actual completion of the purchase. Between the signing and the Closing is usually a time when a number of things still need to be done before the business is finally transferred to the buyer's ownership.
11 Post Merger Integration
The Post Merger Integration (PMI) is the integration phase after a merger of companies. In this phase, the Processes, procedures and structures of the companies involved merged or restructured. This can also include the culture and leadership of a company. Especially when two companies are to be linked, special attention must be paid to the aspect of connecting human resources.
The companies need to be harmonised accordingly so that operational procedures are guaranteed.
Join our webinar Buying a business without risk.
The checklist for business successors
Creating a checklist is indispensable in any case. There are many points to consider, clarify and check. Without an appropriate checklist, one runs unnecessary risks in a business succession.
It makes sense to create a checklist with appropriate M&A advice, as there are Individual points for each company need to be clarified. The better the checklist is tailored to the company and the company successor, the more successful the takeover will be.
Moreover, all important aspects are then clarified at a certain point and there are no more open questions.
Our sample checklist addresses the most important points regarding business succession.