Buying a business

Ad Astra Equity

Buying a business can be a life changing event for many! Owning a business gives you the freedom to control your destiny. Work with those who you want to work with. Create a balanced lifestyle between personal and business. Reap the rewards of the risk. Challenge yourself to new heights. Etc.

However, because Ad Astra Equity is sell-side representation only, we partner up with buy-side firms & tools to connect you with.

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Buy-side Process

Getting started with buying a business can consist of understanding your geographical focus, service/products, size, role within the business, types of customers, technologies, personnel, etc. Once these items are more defined, the buy-side team would begin the candidate search.

Once you have an idea of the type of candidate you want to search for, buy-side reps will begin to tap into their database, industry associations, networks, and other methods to find your candidate. Providing a list of candidates to your buy-side rep will not only have a clear defined target, but may also give you your time back while the rep attempts to make contact.

Using a third-party for the initial contact with these targets can be critical. As most businesses and entrepreneurs are aware, target companies frequently receive calls from investment bankers, business brokers and competitors inquiring about their availability for sale. These outreaches usually lead nowhere and make targets skeptical of entertaining a sale process. Having an experienced advisor help with this process should help sellers feel more comfortable when these initial stages begin.

The buy-side reps job is to then gather pertinent information on target companies so they can evaluate those opportunities against your acquisition profile.

Following this initial screening, the rep will present suitable candidates to you and your management team for further evaluation and internal discussion. If the target is approved, the rep will request additional diligence information from the resulting target list to further refine the viable candidates.

Getting an in-person meeting between the candidates and the management team is very important for both parties, preferably at the candidates business location. While the buy-side rep can help set this up, it is ultimately up to the management team and the seller to approve of this. Occasionally, a prospective target will not meet until an offer is submitted, but for M&A deals within the lower middle market, you can have success in arranging an introductory meeting between the parties at this stage.
In conjunction with a site visit, a buy-side rep should develop a valuation model containing historical and projected financial statements, quality of earnings adjustments, working capital requirements and a determination for the fair market value of the business. Based on these results plus cash flow requirements, the buy-side rep will advise you on a transaction structure necessary to prepare a Letter of Intent (LOI) for the target.
Buy-side reps will work with your counsel (or their own in-house counsel) to draft a customized Letter of Intent (LOI) for submission to the target. The LOI includes certain binding and non-binding terms and outlines the primary components of your intended transaction. The LOI will then be mutually executed between the two parties, providing both parties a level of comfort that the general framework of a deal has been agreed to, before the client conducts significant effort in detailed due diligence.
The due diligence process includes a legal, financial and strategic review of the target’s documents, such as financial statements/tax returns, contracts, patents etc. Clients will typically hire transaction counsel that performs the legal review, its internal/external accountants review the financial information, and its management performs the strategic review. Results of the due diligence investigation will further refine the value of the target’s business and may affect deal terms, financing, reps & warranties, employment agreements, etc. included within the binding purchase agreement between the parties. Buy-side reps work with the client’s deal team throughout the due diligence process.
Prior to closing the transaction, the buy-side rep calls upon the understanding of the target’s business, ownership, management and financial situation to help the client’s management team determine the appropriate transaction structure, negotiate deal terms and successfully close the acquisition. They will then closely review and critique the final legal documents before execution.

Contact us

If you’re looking to buy a business, reach out to us. We will do what we can to help you find the right team.

Many times when a buyer begins the search, they may not be seeing all the deals, as many deals are not listed for sale, but require a warm intro. Among that, they need to make sure they have the correct targets, correct process, correct documents, funding, and the right team in place to handle an acquisition.

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