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Archive for the ‘Buying a Business’ Category

Top tips for choosing a franchise

Thursday, May 10th, 2018

If you often find yourself thinking ‘I could do a better job of this business’ then taking on a franchise could be a great move.

When starting a business from scratch there’s always a long way to go before you have an established place in the market. However, with a franchise, you’re buying an established name, with established operational, sales and marketing procedures that are proven to work. You are also buying a whole range of support and training opportunities for yourself as a business person.

However, it isn’t always plain sailing and the British Franchise Association has put together a list of priorities to consider before taking the plunge and buying into a franchise.

1. Take into account all the costs involved in running the franchise, not just the initial buy-in amount, and ask if you can really afford it. You’ll need working capital to keep the franchise running on a daily basis and you will have to pay a percentage of your sales income to the franchisor each month.

2. Talk to existing franchisees in the network. You should have access to other people working within the franchise network you are interested in. If you are only given one name, be cautious.

3. Make sure you are offered the right level of training. If you feel you will need to undergo training in order to make a success of the franchise, make sure this is included and offered.

4. Ask a franchise lawyer to check over your contract. This is a no-brainer really and could help you to save valuable time and money in the long run.

5. Ensure you understand the franchise. Do some research on how the franchise works and what is involved in running the business. You will need to have experience or an aptitude for the kind of business and work involved. Go for a franchise that appeals to your personality and your professional experience.

Taking on a franchise can be a fast route to success for those looking to start their own businesses. However, ensure you take advantage of the support offered by the British Franchise Association to help you make the right decision and advise you on your journey.

Luxury tearoom and B&B business for sale in Ludlow

Monday, February 26th, 2018

Many of us dream about quitting the rat-race and setting ourselves up with a nice café, B&B or guesthouse business in a beautiful area. Well they don’t get much quainter than this – a luxury B&B, tearoom and restaurant in Ludlow.
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A guide to buying assets from insolvent companies

Thursday, September 29th, 2016

Unfortunately, there will always be companies that fail to succeed and are closed down. The assets left behind, like equipment, machinery and property, are left for the licensed insolvency practitioner (IP) or liquidator to sell on to try and make some money back for creditors who are owed money. The profits made from asset sales are then distributed equally to creditors and the case is closed.

Liquidation is usually the last resort for companies if all other turnaround methods have been exhausted. Creditors rarely receive everything they're owed back, so the selling of assets helps to cover some losses.

Acquiring assets like property or machinery from an insolvent company is very different to buying on the open market. Often it’s appealing to buyers because assets are sold at a bargain and sometimes sold separately – a unique opportunity for business owners and competitors.

If you are interested in buying assets from an insolvent company, subscribe to the Business Sale Report website as well as The Gazette for information on companies in liquidation with assets to sell. Alternatively Cheswick Capital may have some assets to sell belonging to distressed companies that they are dealing with. If you already know of a company with assets you’d like to buy, contact the appointed liquidator or insolvency practitioner (IP) involved in the case. They will be able to provide you with more details.

Note: IPs employ chartered surveyors to value and sell assets so creditors cannot accuse them of selling assets at an unfair price. This guarantees the process is transparent and follows procedures correctly.

Top tips for buyers

1. Ensure you are buying assets through an insolvency practitioner appointed by the company, not just with a company director. Moving assets or selling property at a lower price before an IP is appointed can be seen as wrongful trading and a breach of the Insolvency Act 1986, referred to as ‘Transaction at under value’. There would likely be a formal investigation and assets would be taken back.

2. There may be more than one IP dealing with the company’s assets so do some research on what’s offered. It’s also worth checking the IP is licensed and properly qualified by a relevant association or body.

3. Assets bought may include contracts which probably end in the event of insolvency, for example machinery or maintenance. Before buying any assets, check that suppliers will agree to an ongoing contract and all parties are happy to continue. Some lenders or third parties may have security over certain assets which you’ll need permission to release.

4. Usually a quick sale is preferred because of time constraints, therefore buyers should ensure they have finance ready. There could be various buyers interested so having funding in place is a good start. Buying a whole business as opposed to just a few assets will involve greater due diligence and responsibility – the IP will assist buyers with this process which may include the transfer of employee contracts.

5. Last but not least, if in doubt, seek legal advice from a practitioner or financial advisor before purchasing any assets.

This is a guest blog published on the Business Sale Report on behalf of Cheswick Capital.

What are you waiting for? It’s a great time to grow by buying another business.

Monday, May 30th, 2016

We are seeing more private businesses appear on the market again after a short lull. One of the reasons for this is that in the lead-up to the recent Budget there were rumours about that the government may have been about to kick the very useful Entrepreneurs’ Relief into touch. Heaven forbid!

This prompted more than a few concerned business owners to cash their chips before D-Day.

There were also a few Smart Alecs winding down their profitable companies in order to extract the cash reserves at 10 per cent before the March Budget put a stop to it, through a change in the small print.

Following the Budget, it’s taken a while for the deal stream to get flowing again, but we are definitely back to business as usual.

There’s some uncertainty about the future in many industries, mostly down to Brexit angst. This can be useful in negotiation leverage by purchasers – who knows whether past profits can be repeated in this unsettled climate etc.

The two choices

Not everyone is interested in growing their business. Of those that do, many fail, or have businesses that just don’t scale. The rest have two choices: grow organically or grow by acquisition.

Both of these strategies need resources. It’s taken as read that there is a growth mindset in place and someone passionate about building the company.

Laura Tenison, founder of JoJo Maman Bébé, the mother and baby specialist, is one of those people. “Re-investing in the business and not taking money out for the first 18 years was key to my success”, says Laura. She has 70 stores now in the UK and hundreds of trade customers abroad.

But growing a small business into a large or even mid-range business not only takes time, it is very hard to do. Most people fail – the stats don’t lie.

Here at the Business Sale Report we see more of those entrepreneurs who prefer the fast track route to expansion. Instead of time they need money – capital – often lots of it. When the deal makes sense and there is astute cash management in place, getting the funds doesn’t need to be a problem it can sometimes seem at the outset.

Asset-based lending, bank finance, venture capital, peer-to-peer lending and vendor finance are all options that are being used every day by business buyers. We separate the fact from fiction on navigating the funding channels in our subscriber resources section.

Hopes high for services sector recovery despite downturn

Friday, July 3rd, 2015

In early 2015, the PMI figures for the services sector hit an eight-month high and confidence was soaring. But in May, the sector dipped somewhat unexpectedly. So why are industry analysts still anticipating strong performance from the sector? We explore the climate within the services sector and ask if now is a good time to buy a services business.

Recent figures indicated that the services sector's rate of expansion is slowing down. The Service Sector Purchasing Managers Index (PMI) from Markit and the CIPS showed that May's index was down to 56.5 from the 59.5 high recorded in April.

The latest monthly index for June should be released in the coming few days so it will be interesting to see which direction the trend has taken in June as May’s reading was something of an anomaly given that the previous month's reading was an eight-month high.

David Noble, chief executive of the CIPS, commented on the unexpected change in the services sector: “Momentum in the sector stalled in May, with the drop in the headline index the biggest fall for almost four years and likely to cause concern as services remains the UK’s largest driver of economic growth.”

Positive Service Sector Outlook in Spite of Downturn

Analysts aren't denying that it is a little concerning to see the service sector follow suit with a bit of dip in confidence after the recent weaknesses also seen in both manufacturing and construction. But with GDP just this week (30 June) revised up from initial estimates of 0.3 per cent growth in the first quarter to 0.4 per cent growth, the PMI figures certainly aren't bringing with them the sense of anguish that might usually be expected.

Chancellor George Osborne was among those to welcome the revised data and triumph the hope for further growth in the near future: “It is clear that our plan is laying the foundations for economic security for working people, with the three main sectors of the economy growing over the past year and business investment over 30 per cent higher than at the start of the last parliament.”

Of course, Mr Osborne has a vested interest in suggesting that his policies and this government's approach are working for the economy. But he isn't the only one showing faith that the latest negativity is a blip in an otherwise upwards journey to growth.

Analysts, including Martin Flanagan of the Scotsman have suggested that in the ongoing climate of austerity, heightened by concern around the Eurozone and the highly probable Grexit, services is likely to be the sector to pull through and keep growth on track.

Mr Flanagan wrote: “It looks like the Scottish services sector is still the best bet to take up the slack as we go forward as a result. It was not exactly ever thus, but it has been for a generation.”

Buy Now to Capitalise on Future Growth

Last month, 17.4 per cent of businesses for sale listed with the Business Sale Report were classed as service sector companies and we’re seeing a strong level of interest in this sector from our subscribers.

Along with everyone else, all we can do is to make educated guesses at where the industry will go in the coming months, but we’re willing to bet that there are a decent number of success stories to be found within the services sector for those smart enough and strong enough to tough it out another few months of potential upheaval.

Check out service sector businesses for sale.

What you need to know about winding-up petitions

Friday, February 20th, 2015

For business buyers, the land of distressed opportunities can be a happy hunting ground, filled with great-value deals and easy-to-acquire assets. But distressed businesses can also attract rival bidders, which is why keeping a close eye on companies served with winding-up petitions can be such a worthwhile exercise.

So what exactly is a winding-up petition?

In short, a winding-up petition, or WUP, is a serious course of action taken against a business that fails to make financial payments to creditors. This can mean that the company has broken any trust the creditor had; its cheques have bounced; or the directors have not kept their word to make payments.

A powerful weapon in a creditor's armoury, a winding-up petition is served when a business, for whatever reason, simply cannot make the payments it needs to. The fact that it can cost anything up to £2,000 just to file a WUP is an indication of the severity of the action – it is usually a last resort when an individual or business needs to get the money they are owed.

Essentially, a WUP is an early indication – before a liquidation or administration take place – that a business has fallen into financial disrepute. Moreover, a winding-up petition is the start of a process which, if ignored, leads to the Compulsory Liquidation of a limited company.

So what is their relevance to business buyers?

As stated at the top, business buyers will often look to distressed businesses as ideal acquisition opportunities because companies that have fallen on hard times usually represent better value to the buyer. But this improved value can often bring with it greater competition. Getting a head start on rival buyers, therefore, is vital if one is to secure an acquisition before others beat them to the punch or enter the fray and drive prices up in a bidding war.

Importantly, once a winding-up petition has been served, the recipient business cannot sell the company or the assets, as this could be reversed by the court. So an immediate acquisition will likely not be possible. However, if one was to use the rather unflattering metaphor of a shark hunting injured prey to describe business buyers seeking out distressed opportunities, then a WUP is the first drop of blood in the water.

Winding-up petitions are not as well reported as administrations, nor are they a guaranteed sign that a business is about to go under, but they are a clear indication that there is trouble brewing. Thus, by monitoring WUPs a buyer can put a target company on their radar long before they will come to the attention of other buyers.

This head start can be crucial – it will give the buyer valuable time to conduct due diligence into the acquisition target, weigh up any assets that would be beneficial to their existing business(es) or establish if they could viably attempt a turnaround of the entire company. Importantly, they can do this before the target enters liquidation or administration, at which point many other buyers will be alerted to the opportunities.

The window of time in question, between a winding-up petition being served and the fate of the company being decided, often in the form of a liquidation or administration, is between six and eight weeks. This gives the buyer time to not only conduct the aforementioned due diligence, but also to speak directly to the sometimes desperate owner of the troubled company and lodge their interest, therefore improving their chances of cementing a deal when the appropriate time arrives.

So, in the competitive merger and acquisition market, where any slight advantage can yield huge benefits, understanding and closely monitoring winding-up petitions can provide the all-important edge a business buyer needs to achieve the sale they're after.

The Business Sale Report tracks all the latest businesses to have winding up petitions lodged against them. Click here to view the latest winding up petitions lodged in the UK.

Technology acquisitions tipped to heat up in 2015/16

Friday, February 6th, 2015

It has emerged that technology companies will be at the top of business buyers’ target list over the next two years, according to research from law firm Pinsent Masons.

UK and Ireland have been highlighted as the most active areas for tech business deals, with London the start-up hub of Europe – no doubt helped along by London’s “favourable tax environment when it comes to tech investment”.

In a survey that questioned 150 senior corporate executives and private equity professionals on their views, about 80 per cent expected a rise in the volume and value of deals in Europe over the next year, set to top the record number of deals seen in the industry last year.

Cloud and mobile were tipped to be the most active areas for acquisition, while wearable tech items and the ‘internet of things’ were ranked as most likely to continue growing organically.

Those questioned in the survey had all completed deals in the past 12 months and said that expanding geographical presence was the most common reason behind technology acquisitions.

Satisfying industry regulations is still the highest legal hurdle to completing tech deals, Pinsent Masons said. Just under half of all successful buyers (45 per cent) said it had been the most difficult challenge to overcome in their last purchase.

Mergermarket’s editor Beranger Guille commented: “As the mid-market heats up, we expect deal activity to increase, particularly in volume, fuelled by growth in mobile payment, FinTech, analytics and security.”

If you are considering making an acquisition in the technology sector, visit our businesses for sale section to view over 100 medium sized technology businesses listed for sale.

Getting a head start on competitors when buying a business in administration

Tuesday, January 6th, 2015

It didn’t take long for the wheels to kick into motion following City Link’s slide into administration two weeks ago as today (6 January) the news broke that a buyer has been found for the company.

The parcel delivery business finally ran out of road on Christmas Eve, with union bosses condemning the failure and subsequent 2,000-plus redundancies as an “absolute disgrace”. But no sooner had the dust cleared from its unceremonious collapse than a buyer stepped forward in the form of rival logistics firm DX Group.

DX announced on Tuesday morning that it had bought more than £1 million worth of City Link’s assets including parcel-scanning equipment, cages used to transport parcels within warehouses and “certain intellectual property”.

The value of the assets is well known to the head of DX, Petar Cvetkovic, as he was once City Link’s managing director before leaving to set up the rival business several years ago.

It had been five years since City Link had posted a profit so, while the timing of its demise was unfortunate, leaving many without presents under the Christmas tree, it was not altogether surprising.

Nevertheless, the nature of this deal and the assets that were bought demonstrates that, even when a business has failed, it will still possess things that are of clear value to rival companies. Moreover, these assets are often available at a knockdown price.

That is why businesses in administration are in such demand among business buyers – because they can be dissected; the prime cuts can be taken away from the deteriorating carcass. In this case the factory equipment can have a clear and immediate benefit for DX, enabling the company to expand its operations or save money on machinery it would have had to buy later on.

The undisclosed intellectual property also points to another attractive selling point of distressed businesses. Whether it is bespoke software for a specific sector or a patent on a particular product, IP can add value to a business looking to grow or become more efficient.

Although City Link’s closure was one of the more widely reported administrations of the past 12 months – again because of its ill timing and painful consequences on people’s festive celebrations – the story illustrates the value of monitoring businesses in distress. Many similar collapses will not receive so many column inches, meaning business buyers must look a little harder to remain abreast of such developments.

Waiting for stories to report on the fate of companies often leaves it too late – a better, more proactive approach is to seek out listings of businesses that have failed or are failing. This will not only give potential business buyers a head start over many competitors, ensuring they spot businesses that have fallen into administration first, but it will also allow them to monitor signs of distress, including things like winding-up petitions, which act as the proverbial drops of blood for the sharks in the M&A pool.

If you are interested in identifying potential turnaround opportunities before the competition, then take a look at our latest businesses in administration list which we update daily for our subscribers.
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Related information:
More information on City Link in administration

Buy a business or start your own? Choosing the most direct path to success

Thursday, November 27th, 2014

There are many reasons why someone would want to buy a business.

For those who already own businesses it is the best way to grow, by expanding into new markets or out-muscle competitors. However, there are many people for whom buying a business is the beginning of a new journey to create their own company and be their own boss.

A nationwide study by Invest in Cornwall in 2013 found that 1.8 million Brits are planning to start their own company in the next five years – many of these will start by purchasing a business that already exists.

For these people buying a business is the metaphorical scratching on an entrepreneurial itch they have been carrying around for some time. And whether an individual has suddenly come into some money or has been saving away so they can start their own venture, buying a business is the first step on a new and exciting ladder.

But what makes buying a business and owning your own company such an attractive, worthwhile prospect?

First of all, often the most difficult aspect of starting a business is to create the idea – deciding what it is you are going to do that will make you money. Then come all the additional, practical challenges: funding, premises, staff, supply chain, business models, and everything else in between.

To buy a business gives an individual a head start and bypasses a lot of these difficult stages. A business buyer inherits structure, systems assets, employees, cashflow, and clients; even if these are things the new owner needs or wishes to change, they are hugely valuable to help get things off the ground.

Moreover, to create a start-up from scratch carries plenty of challenges, unknown quantities and risks. Indeed, Startups.co.uk notes one such problem: “Many start-ups fail from the outset because it’s so difficult to get people to put money towards a risky venture. But if you’re buying a business, depending on its cash flow and assets, you should be able to borrow as much as 70 per cent of the acquisition cost.”

Of course, this does not mean that when someone buys a business they are going to hit the ground running – the majority of small companies that will be acquired by a first time business buyer will be the kind that are struggling or in distress. Changes will need to be made, but importantly the skeleton will already be in place – given the right vision and enough resources, a new owner can then set about turning things around.

It might take months to complete an acquisition and it will also require large amounts of capital upfront, although, as pointed out, it is easier to get your hands on this funding when buying a company as opposed to creating a start-up. Nevertheless, buying a business can be a great springboard towards realising an entrepreneurial dream without having to complete the tricky opening stages.

For those who are dipping their toe into the merger and acquisition (M&A) market for the first time, step one is to set about finding a business to buy. A word of advice: looking at businesses listed for sale or falling into distress, rather than pursuing off market acquisitions, will almost always offer the best value for money.

So for anyone wanting to start their own business and become their own boss, the merits to buying a pre-existing company and moulding it to your heart’s desire are clear. Avoid the more pronounced risks and challenges that come with starting a business from scratch and make the M&A market the first stop on your route to entrepreneurial success.

Big data: What's all the fuss about?

Thursday, October 30th, 2014

Big data: it’s a term that almost everyone will have heard of, but why should business buyers take note?

To start with a brief definition, this latest technology buzz phrase relates to the exponential growth in the amount of data that is being generated, stored and analysed. Both individuals and everyday devices leave behind a data trail, which is becoming a gold mine for both private and public sector organisations – cheaper storage solutions and the availability of greater compute power via the cloud means that these massive data sets, which were previously too large to make sense of, can now be dissected and transformed into valuable insights.

For business buyers, it would be foolish to ignore a technological trend that is transforming the IT and digital world, especially as it is promising huge opportunities for those able to capitalise on it. Indeed, it is predicted that the global big data market will be 44 times larger in 2020 than it was in 2009. Furthermore, it has been said that big data could be worth £216 million to the UK economy over the next five years.

As big data has established itself as a mainstream business technology over the past 24 months, there is massive demand for a wide variety of products and services that can turn petabytes into competitive advantage.

The most obvious area is data analytics. Importantly, not only are the tools for crunching numbers highly sought after, but the people who can do it are also on the wish-list of many businesses; the fabled ‘data scientist’ is to 2014 what the web developer was during the dotcom boom. This is the person who can take data and make sense of it to give a company competitive advantage.

Research shows that the economy has driven a need for 69,000 additional big data specialists over the period 2012-2017, with 60 per cent of businesses already struggling to hire people with data science skills. The point? If people cannot hire in-house experts to unlock the value that is sitting within huge data sets then they are going to look to employ the services of a company who can.

There are countless innovative start-ups that have created cloud-hosted software for analysing big data, many of which operate in the ‘Tech City’ area in east London. They can offer the platform for companies, with or without a data scientist, to analyse and visualise big data. Crucially, these technology solutions are often targeted at particular verticals.

For business buyers this points to big opportunities – whether already operating in the technology sector or providing services to sectors like retail, healthcare or financial services, obtaining big data capabilities through a merger or acquisition could open the door to huge profits.

It might be a competitive market but it is one that is guaranteed to grow over the coming years – the big data bandwagon is one that business buyers ought to consider jumping onto, and quickly.

If you are considering a making an acquisition this year, take a look at our latest businesses for sale to get an idea of medium sized businesses on the market.