How to merge & acquire a business

how to buy a business.

Essential Buying Tips

Look for a business that shows promising future earnings. Avoid businesses that are in the “sunset” industry. Be mindful of threats from regulatory pressures and technological advancements.

Understand the type of business and your financing options. Does the business require a high level of working capital? Do you have sufficient cash to complete the transaction and operating through unforeseeable risks?

Look for businesses with intangible assets that can improve your market position. Intangible assets such as licensing rights, patents, and strong R&D can help you generate positive long-term benefits.

Look at the company external financials as well as its internal financials. Does the company record the expenses correctly? Are the non-operating income separated and noted?

Many buyers do not go through the shareholder agreement. Make sure you understand the rights, options, and any restrictions of share transferability.

Understand the tax liabilities of the company. If there is carrying losses, how would it affect your purchase price? A well-documented valuation should provide information on tax and provide some guidance on how to address potential issues.

If you are buying partial shares or an interest of a business, make sure you consider the discount on minority interest.

Does the company have the right culture for you? How do you plan to engage with employees after the transition? A company with long-term employees can have a very “sticky” culture that you might have to adopt.

Are there any past or pending legal issues? Make sure you understand the implications of all social and legal issues to avoid problematic and expensive lawsuits.