Buying a business: Deciding what to buy
Your decision about what to buy should be primarily based on commercial considerations. Questions to consider include:
- Do you want a particular company in its entirety, or a division?
- Do you want to buy the company, or the trade and assets of the company?
- Are there any assets included in the company that you do not want?
You also need to decide how the business will be incorporated into your existing business. For example, if you acquire the trade and assets you could either arrange for them to be bought directly by one of your companies or by a new company that you have set up for the purpose. There are significant tax and commercial implications depending on whether you buy the assets and trade of a business or a company. In broad brush terms, a vendor is likely to want to sell the company and the purchaser is likely to want to buy the trade and assets.
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You will need to negotiate whether the vendors declare a pre-sale dividend. There are various reasons why this might be attractive, such as:
- To extract surplus cash or any other assets that the purchaser does not want to buy, such as investment or other assets unrelated to the trade. This might increase the value of the deal to the vendor with no loss of value to the purchaser.
- To take out any assets that the vendors do not want to sell. The company premises often fall into this category, with the purchaser signing a short term lease on the premises as part of the deal.
Where next?
Within The acquisition process… Within Buying a business… General...
