Know who you are buying from

When acquiring a business it can be just as important to consider who you are buying from as what you are buying. The different types of seller must be considered, and the buyer must decide which is the most effective kind of seller for them.

For example, there are the big groups that sell subsidiaries. These are the source of most buy-outs. When the board is under pressure to make disposals to repay debts or increase focus, the non-core activities have to go. Timing is frequently more important than price, so a buyer can often find a bargain. Frequently, a falling share price can mean a public company has to exit a loss-making business in a hurry just as it is about to turn around. Increasingly, however, corporate sellers have used auction processes to get better prices, especially from financial buyers. Such vendors generally want simple, cash-only deals. It can be difficult to locate the individual within the organisation who has decision-making power, so being ready exactly when the divestment takes place can make all the difference. Dealing with large corporations takes patience and resources at short notice, but the prospect of a beneficial deal can justify the trouble.

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