Due diligence is considered as something more than an attempt made by a buyer to authenticate the worthiness as stated to the buyer by the seller.

It is stated as something more than just this. If considered in a broader aspect, due diligence is considered as a model for a buyer to become comfortable with the marketing, operations as well as finance related to the project or business in a way that makes it easy for the buyer to easily understand the whole scenario both from outside and inside.

What is the time duration for due diligence in case of acquisition or merger?

Naturally, buyers want the due diligence to continue for a time span humanly possible, whereas sellers prefer getting due diligence done rapidly. If you look at the arguments offered by both sides, it does make sense. Quicker due diligence for the sellers can be put to use as a mode to complicate or hide the real-time business issues from the buyer.

Similarly, protracted and slow due diligence by a buyer can be considered as a technique to find more flaws and also screw up the valuation of the company.

Hence, due diligence is considered sane if it is carried out for that time span as required by the buyer to get all requested information or items from the seller. Elongation of the process ends up complicating the deal for the seller unnecessarily. Typically, there is a saying that time is responsible for killing all the deals, including the good ones, as time has never been anyone’s friend in making deals. Sellers should be made aware of the duration of the due diligence so as to grab a good deal.

Sellers prefer it short as Buyers look for longer ones

Reasonable due diligence timelines are important, especially for that type of deal where a buyer has managed to win an auction and is, in turn, looking ahead to pay a premium potentially. Many of the bidders may offer their final and best offer on a certain business only to conclude in due diligence upon finding something inevitably that probably concluded some transgression internally. Curtailed due diligence will not be accepted by any buyer but if a seller is asking for a premium, then you can expect to go through an exhaustive span of due diligence.

However, in case the seller is prepared reasonably besides the buyer being experienced, then the expected span of due diligence should not be more than 30 days to 90 days. In case the seller is unorganized along with the buyer being inexperienced and failing to coordinate, this span of due diligence can be more than 90 to 180 days. But this span is also affected by the company size as a whole. You can save a lot of time on the due diligence process if you hire assistance from someone who knows the art of managing this kind of thing and will, in turn, assure you of a short due diligence period.

In case you are thinking of selling or buying a firm and have a lot of questions with respect to due diligence and its process, feel free to get in touch with us to discuss more on the objectives and goals, along with the tools that can be used for your purpose.

To be outgrowing in the market, one needs to have out-of-the-box ideas. You need to be creative and strategic to stand out in a profitable position, solve your customer’s issues, and come up with products or services that the market demands.

Now there can be two ways. Either build your own startup that involves proper planning, staffing, and implementation or buy an existing business having everything already designed. You just need to add your efforts to the same brand you are picturizing in your mind.

So here, we will explain the various benefits of buying an existing business and its outcome.

You already know the Market Demand for the Product or Service

When you buy an existing business, you already know that it has a good reputation in the market and its product or service is in high demand, so it becomes easier for you to reach the mass since a certain number of people is definitely going to visit this place and would continue to do so if they receive the same quality of service. So it is very important to conduct due diligence knowing that the product or service is well maintained and served and be a part of your decision. So while choosing any business that is on sale, check carefully if they have a good reputation in the market or not and act accordingly.

Reduces the Pre-Start Up Works

Buying an existing business not only gives you the idea of its market demand but also reduces your work and saves time and cost on its advertisement and other pre-selling activities like selection of suppliers, purchasing of raw materials, Inventory, proper staffing at the right place, selecting a proper place for the start where all your requirements would be of easy access and reaching the customer, etc.

You will also benefit from trained staff members, good bonding with the suppliers, a fixed customer ratio, proper time schedules, and protocols. The owner has already given their heart and soul to make it stand in a reputed position. You may require to hire additional staff or buy upgraded equipment as per your requirement, but mostly all these are done so you can focus on the profitable aspects of the business.

Reputation and Branding

Acquiring a reputed business would help reach the mass since many a time new startups face a lot of difficulties to expand or gain attraction in a crowded market area because of other existing business that has already gained success. So when you buy existing ones, you are already inheriting their brand name and success rate and also the market share, which will be a considerable part and will save your cost and money.

Secured Business Financing

As previously explained, branding plays a major role in business. Not only to create faith in the Customer’s mind, but it will also be easier to get loans from a financial institution. Business Acquisition process would not be troublesome as the lender can check the history of the Business’s finances. The lenders will find it less risky to grant the loans, having seen a healthy prospect of the Business. So a good reputation in the market would help increase profits and make other business-related documentation easier.

Loyal Customer Base

Since this is an ongoing business and it has earned a lot of customer base serving the best products or services, this will be easier for you to attract more customers with this feedback where new startups lag or face the struggle to earn this. This will lie in your hand to make it a prospect in the future and help in standing in a good position.

So selecting a perfect business on sale requires a good market survey. This will guide you whether you will be in a profitable position or would increase your liabilities more because of any bad reputation. Considering the above facts would be of big help.

Bowarr is right here to help you find the right and profitable business to buy in UAE. Conducting a thorough market research and business valuation, we can bring you the best business you will own confidently. Give us a call or send us a message.

Starting a business from scratch is very complicated. That is the reason many aspiring entrepreneurs are inclining towards buying existing and accomplished businesses. What are the advantages of choosing to buy an existing business? An established customer base, recruited staff, and reliable revenue and cash flow are few benefits of buying an accomplished business.

Buying an existing business is not entirely easy. From scouting for a suitable purchase option to closing the deal, a lot of work goes into acquiring or buying an established business. One of the most important steps in this business transaction is to secure funding or capital. What are the available options to finance or fund this business transaction? The experts at Bowarr Management LTD have outlined the most popular and practical ways of funding your business acquisition. Here’s everything that you need to know about.

Ways To Finance A Business Acquisition

1.    Personal or Family Money

This is often the first source that anyone would go to. If you or your family can cover the expenses of the business acquisition, then it is a very secure and viable option. Also, it’s a practical step if you are considering buying a small business instead of a big chain.

However, there are certain things to remember before bringing in your own money. What is that? Consult with an accountant. Also, ensure that you aren’t outing all of your money into buying the business because you will require a certain amount of capital also. You can also decide to use the money borrowed from family members or relatives. In that case, there might be tax implications.

2.    Seller Financing

Some sellers will also agree to provide finance or loans. They agree to give a note or accept staggered payments. They do it to ensure that they obtain continuous assured income for a certain period.

Depending on the local laws, there are rules concerning seller financing, especially if you wish to opt for another method of financing as well. Some sellers also agree to trade certain assets of the business for a lower price.

3.    Partners

This is a quite popular method to bring in financing for a business acquisition. Instead of buying the business solo, one can choose to be the owner of the company while also dividing the payments with a partner. Bringing a partner onboard has another set of advantages, too, besides the financial ones. When you make someone with specific expertise your partner, it will be a valuable addition to the company as well. Be careful not to skip the partnership agreement because it may bring ownership issues in the future.

4.    Selling Stocks to the employees

This is another method to finance the business acquisition. When you sell some stock to the employees, you can get a huge discount. You can make up for 50% or even 90% of the business price. However, you should keep hold of the controlling stock because you need it to retain ownership of the business. Additionally, you have to restructure the company into an S or C Corporation to issue the stock.

5.    Lease the business

You can choose to lease the business than buy it entirely at first. You can purchase it as time goes by, and you can afford it. However, the catch is that not all sellers will be willing to do this as they want to dust their hands and be done with the business. But, if leasing seems a more viable option for you despite being costlier in the future, you can ask your seller or find someone willing to go with this option.

6.    Debt Financing

Debts from banks and other financers are the most preferred method to acquire capital for business acquisition. You will have tons of documents and data to show to banks or other financers while approaching them for debts. They include financial histories, inventory, cash flow statements, valuations, and more. Data will make you a suitable candidate for debt because most financiers and banks do not prefer to offer debts for a clean slate.

Financing Options If You Are Looking For A Small Business Loan

If all you need is a small business loan, then here are some practical go-to options to help you buy the business:

·       Term Loan

You can take a term loan which you can repay in some certain set periods. Term loans usually last between one to ten years. It depends on the amount of money that is being lent. If it is a rather big amount, then it can also last up to 30 years. A term loan usually has a fixed or floating interest rate. This also depends upon the lender or the financier, and the amount of money that is involved.

·       Asset-Based Financing

Getting asset-based financing for a business acquisition is quite easier because it consists of a lot of accurate and proven data along with reliable history. Before lenders approve of asset-based financing, there are a lot of factors and essentials that they consider. Some of them are given below:

• The personal credit score of the borrower
• The credit score of the concerned business
• Annual revenue of the business
• The existing and the predicted cash flow
• The time since the business has been in operation
• Tax returns of the company
• Balance sheets
• Outstanding debts

Often for term loans and Small Business Loans, the buyer has to put in some amount as the down payment. It is generally an amount that is 20-25% of the acquisition loan. For Small Business Loan, there has been a modification concerning the down payment. According to the updated requirements, buyers have to put in a down payment of 10% of the acquisition price. 5% of that can come from the buyer, and the remaining can be in the form of a seller’s note. However, the seller should agree to be on ‘standby’, meaning that he will not be repaid until the bank is paid.

Some Requirements When You Seek Financing

Finance is not something that is easily obtained. Despite buying an established business that has a reputable history and proven track record, you as a buyer should possess certain essentials which will increase the probability of obtaining finance. What is that? Consider the following:

• An updated business plan developed by experts
• Accurate financial projects of the business when you will have ownership
• Business valuation
• Your experience
• Value addition that you bring to the table

You should be able to convincingly deliver your story of how there will be significant improvement and growth in the business once you take over.

In A Nutshell

You do not want to return empty-handed when you approach for finance. Having a lender’s perspective can also help you while trying to gather capital for your business acquisition. Formulate the value of the business that you wish to purchase or acquire and map out how you plan on making it grow in the future. Also, outline the past wins and losses of the business to make the financiers understand the viability of your business more clearly. How can you gather all that information- including the risks and highlights of the business? Due diligence is what will help. Due diligence will aid in understanding the business that you wish to buy and will provide you will every detail. Such information can help you to have an upper hand while convincing financiers or banks for capital.

Bowarr Management DIFC has remarkable expertise and long-term experience to look beyond the numbers. This, combined with our extensive knowledge about a wide array of industries, ensures that we have all the answers to all your financing questions. We provide premium Due Diligence services and will ensure that you have adequate information to put you on the positive side of gathering capital. Get in touch with our professionals soon.

You have now come to the final stage of the process of buying a business. You have found the perfect business to buy, have done adequate due diligence, gathered the resources and capital you need to buy the business and are now ready to close the deal.

But, here’s something that you need to keep in hand before proceeding to officially buy the business. What is it? You need to keep in hand all the important documents and agreements. Why do you need them? Having all the required and necessary documents with you will help you to have a smooth and uncomplicated transfer of the business. What are the documents that you will need? Read on to find out.

A List Of All Important Documents That You Need To Have Before Officially Closing The Deal

Sales Purchase Agreement

This document will prove that the sale has taken place. It will vouch for the official transferring of the business assets to you from the seller. It’s a vital document to possess while buying an existing business.

 Adjusted Purchase Price

This document will state the final count of the purchase cost of the existing business. The price will also include all the prorated expenses like rent, utilities, and inventory.

Lease Document(s)

If there is an existing business lease and you are taking it over, ensure that you have the related document and that the landlord is aware of that. If you are negotiating a new lease, then ensure that you have the document which everyone understands.

Vehicle Documentation

If you are buying a business that also gives you vehicles, you will have to transfer the ownership to yourself with the local DMV. Hence, make sure that you have all required completed forms and vehicle documents at the time of the sale.

Documents having Patents, Copyrights, and Trademarks

While buying an existing business, you have to ensure that certain trademarks, copyrights, and patents are transferred to you- the new owner. Some forms are required to make the transfer. Hence, double-check that you have them also.

Non-Compete Agreement

Asking for non-compete from the previous owner is a standard procedure. It is a good idea to obtain the agreement because it will ensure that the previous owner will establish a competing firm right across the street.

Consultation or Employment Agreement

When will you need this agreement? When the seller decides to stay in the company as an employee. Hence, if that is the scenario, make sure that you have the agreement signed by him/her.

Asset Acquisition Statement

Document that outline the assets that you have acquired in this business acquisition and also for how much. This is an essential document because it’s needed for your tax returns in the future. Hence, make sure that you have it.

The Benefits Of Having All The Necessary Documentation

 Many business professionals vouch for the fact that keeping all the documents in a safe place is essential for smooth takeover, integration, and also for future concerns if any crop up. Many also suggest keeping digital or electronic copies of the documents and agreements stored in an online storage platform. Don’t forget to protect the access of such platforms as they can be easily hacked!

Here are the benefits of having such important papers with you:

• They can help you avoid legal troubles that may arise due to duplicated documents
• They are required for financial audit
• They can help you to avoid surprises in the future. You don’t want authorities knocking on your door and telling you that you don’t have the proof for the ownership of an asset or copyright of something concerning the business.
• They make the integration process simple and quick
• Documents also ensure that there is clear communication between you and the seller
• Accurate documentation and agreements protect both the seller and the buyer.

In Closing

You are ready to take full ownership of the business! Starting a new business from scratch can be very challenging. However, buying an existing business eliminates the complexity and simplifies the planning process. Additionally, possessing all the above necessary documentation and agreements will make the process even smoother and seamless.

What can help you to be in control when you are buying an existing business? Expert advice! Experts and professionals will help you to know every detail while buying a business and will also ensure that you have everything in hand.

Bowarr Management LTD has been serving the business and M&A industry for several decades. We have collaborated with a lot of individuals and businesses on various M&A deals. Our team of experts and professionals are one of the best in the industry and will provide premium services for the due diligence process and also for successful deal closure. Get in touch with us for further queries and information!