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There are several things you ought to consider, and many steps you should take, in the lead-up to purchasing a commercial venture. Some of them are legal. Others are strategic. Financial issues related to the potential deal are also worth pondering. What follows here is an exploration of the steps to taking over a business:
Do Due Diligence
The first step (and perhaps the most important one) on this journey is to scrutinize the business you want to buy. Do this whether you are proposing the takeover or the business’s owner is offering it to you. You want to be sure that it’s something you can deal with, an entity that won’t cause you significant trouble in the future. Things to ascertain include the accuracy of the business’s current valuation, its present (and future potential for) profitability, and the owner’s reason for selling it. Other matters worth thinking about include its alignment with your own company’s vision, its brand strength, licenses, an array of assets, and how much you’re willing to pay for it.Seek the Help of Professional Advisors
It’s often the case that no one person has a comprehensive insight into how to acquire a business—at least not every detail of the process. There’s so much to do, and a lot of technical matters to sort out. That’s why you should hire advisors with the relevant knowledge and skills to help you see things through. In some cases, it might be enough to ask the advice of people with deep experience in the sort of business you’re looking to buy. This could work for smaller businesses, e.g. a single supermarket or a petrol station. But if you’re taking over a larger entity, you’ll need to consult with lawyers, accountants, and asset valuers. They will help you navigate the legal and financial issues you’ll encounter.Get an Accurate Valuation
We have mentioned that you should solicit the services of a valuer. This professional will assess the current value of the assets of the business you want to buy. The result of the assessment will enable you to decide a possible fair price to pay. There are several ways to determine the value of a business. One, the Discounted Cash Flow (DCF) method, calculates the current value of the business based on its projected future cash flows. Another, the Book Value, is arrived at by subtracting the total liabilities of the business from its total assets.Sign up for the Connect Nigeria daily newsletter
Secure Financing
Smaller business takeovers usually require that you’re able to pay as soon as a deal is done. Because the sums involved aren’t as great as in larger deals, you have a wider array of financing options. You could purchase the business with your funds or from your business’s accounts (if it’s robust enough). Larger acquisitions may involve financial institutions, which could help with structuring and financing the deal. Facilities are often repaid from the business’s revenues over time. Whatever funding option you settle for, ensure that it’s one you can repay within the time stipulated for it.Negotiate with the Business Owner
The first part of this step is making an offer. Take care with this; the back-and-forth that could ensue may be long and tedious. You must handle the discussions around pricing patiently and tactfully. Once a final offer is agreed upon by all parties, you will proceed to post-offer negotiations. These engagements cover matters ranging from payment terms to details of the handover process. Experts recommend that you write a few months’ transition period into the purchase agreement, which will allow you to maintain regular contact with the business owner in that time.Seek Regulatory Approval
Your purchase of a business has to be approved by relevant authorities if it’s a larger company. For example, you may need to file a letter of intent, along with several documents (memorandum, board resolution, certificate of incorporation, etc.) at the Securities and Exchange Commission (SEC). In addition, you may also have to submit documentation related to the acquisition to the Corporate Affairs Commission (CAC). You can do this on their website.Complete the Handover
Ideally, you will have complete control of the business after a period of transition. In that time, you should establish contact with the business’s employees, suppliers, partners, and customers. Get a feel of these relationships, and decide how best to move forward with them. There could be a need to restructure the business to make it run more efficiently. In doing this, be sure to get the input of its management, as well as from business experts. Only go forward with restructuring plans after conducting a thorough review of its present status.Register to attend the CN Business Mixer
Final Words
The process of purchasing a business can be long and tedious. However, it will produce great results in the long run if you approach it cautiously and with a good plan. We have shown you how to acquire a business in Nigeria. It’s up to you to follow the steps discussed here to make things work in your favour.Got a suggestion? Contact us: editor@connectnigeria.com
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