Purchasing a Business
Making the Acquisition Work for You
BUSINESS ADVICE FROM CPAS
Buying a business requires a considerable amount of time, effort, and resources. Competent, professional advice can save you valuable time and money in the process, and:
- Ensure that your goals are met in buying a business.
- Ensure that you pay only what the business is worth.
- Ensure that you receive what you pay for.
EXPEDITE THE COMPLETION OF THE TRANSACTION.
When buying a business, a certified public accountant (CPA) can assist you in successfully completing the transaction.
IS BUYING THE RIGHT DECISION?
Businesses are purchased for a variety of reasons. Buyers may look to acquire a business to reach a certain goal, such as entering a new market, broadening a product line, diversifying their holdings, or just meeting specific targets.
Regardless of your reason for buying a business, you should carefully consider all available alternatives before making your decision. Developing the resources internally or acquiring specific assets may be options to acquiring a business. Your CPA can help you explore these and other alternatives and can assist you in making the right decision
THE PROCESS OF BUYING A BUSINESS
The process of acquiring a business can be simple or complex, depending on the transaction. It is important for you, as a buyer, to generally understand the process so that you can make informed decisions. Although it will differ depending on the circumstances, the buying process basically consists of the following phases:
The planning phase.
Before buying a business, identify your goals and evaluate the expected benefits. You should consider what you want to accomplish and how buying a business will help you to achieve these goals. It is important to develop a comprehensive business plan that documents your goals.
The screening phase.
Now you can establish selection criteria for evaluating the target company. Criteria may include industry, location, sales volume, profitability, value of assets, as well as the seller’s price for the business. It is helpful to compile a list of potential target companies using industry and trade data publications and directories. Screening the target companies in this manner will help to eliminate all but the most likely targets and to identify those candidates worthy of further investigation.
The investigation phase.
Once the target companies for acquisition are identified, it is critical that they be thoroughly investigated. This research should include an analysis of each company, including its financial and operating history and future outlook. If you determine that the acquisition is worthwhile and will assist you in achieving your goals, you may decide to
pursue the transaction by making an offer.
It is important to consider the tax aspects of the transaction when formulating the offer. A properly structured transaction can result in substantial tax savings to both the buyer and the seller.
The negotiation phase.
The buyer and the seller will have specific needs that must be met. These needs often conflict and must be negotiated. Counteroffers are made, evaluated, and modified, until a final agreement is reached. At this point, the necessary documentation is prepared and the transaction is completed.
CPAs have the experience and ability necessary to guide you through each phase of the acquisition process. Their knowledge of this process, combined with their skills in planning, valuing, investigating, negotiating and tax planning are crucial to a successful acquisition.
The expertise of a CPA will help you to avoid the many pitfalls and problems that could arise in buying a business and enable you to ultimately achieve your goals.
Before settling on a price for a business, consult a CPA to help you determine the company’s worth and examine the tax aspects of the transaction.
WHY CHOOSE A CPA?
Purchasing a business is a major undertaking. The process can be lengthy, complex, exhausting, and occasionally frustrating. Enlisting the help of astute professionals to advise you can lead to success in acquiring the right company. Besides attorneys, bankers and insurance agents, a CPA should be a key member of your acquisition consulting team.
CPAs, with their broad background and expertise in financial and business matters, can offer you valuable advice and assistance in making the acquisition work for you.
A CPA CAN HELP YOU
- Identify and evaluate target companies.
- Prepare a business plan that supports the need for the purchase.
- Estimate the fair market value of the business to determine a reasonable offering price.
- Conduct the pre-transaction due diligence review (sometimes referred to as a businessman’s review).
- Obtain financing to complete the purchase.
- Structure the purchase to obtain favorable accounting and tax treatment.
- Negotiate the terms and conditions of the purchase agreement.
- Integrate the operations of the business(es), if the purchase involves the merger of companies.