When purchasing a business, it is not only important to consider what business you are buying, it is also crucial to understand who you are buying the business from. There are several types of business owners and as the buyer, you need to be mindful of the company that will best fit your circumstances and lifestyle or at least understand the probable implications of purchasing from a certain proprietor.
Below are four of the more common types of owners you may encounter when looking to buy an existing business.
Private equity ownersPrivate equity owners are professional buyers and sellers of assets so tend to be unattached and unemotional in terms of the business itself, focusing exclusively on the price and speed of sale. They have the reputation of being tough negotiators and can be inflexible on warranties but for the buyer there is the advantage in that private equity owners tend to act relatively quickly to get deals off their books
Large corporation selling off a subsidiaryA large corporation selling off a subsidiary is another common type of seller you may encounter. These owners are generally large corporate groups which have made the decision to dispose of one or more of their divisions. Just because the owner is a big corporation doesn’t mean you leave your caution behind. It is still necessary to properly understand the reason for their decision to sell.
Privately owned companyYet another common type of owner in the business sale landscape is the privately owned company. Inevitably, owner-founders are often emotionally involved with their business. If you are looking to buy a company like this, you need to be ready to win over the current owner and reassure them that their company will be in safe hands. This is in stark contrast to corporate owners, private equity owners and administrators who only care that the buyer has the money for the purchase.
Firms in administrationWith the rise of businesses falling into administration, buying a firm in administration is more common than you think. Don’t simply dismiss a business because it’s in trouble, there may be a significant opportunity here worth exploring. What you do however need to do is first assess a few things.
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