Posts

Buy a business

It’s a Great Time to Buy a Business

As you look to purchase a business make sure you are doing it for the right reasons.  Don’t just say, “I want to get rich.”  That way of thinking probably won’t cut it, unfortunately. You need to make sure you have wisdom, passion, and a solid plan for your new business. Do your due diligence!

There are a number of factors that make this the best time in history to buy:

  • Supply and Demand
  • Capital Availability
  • Larger Companies Are Worth More
  • Strategic Savings

Supply and Demand

As baby boomers exit their companies, there are more sellers and less buyers which makes the selection of businesses to buy better than it has been in the past. Many Capital Advisors that provide buy side searches or sell side representation have access to websites that list companies for sale. This access makes it easy to find the appropriate demographic, niche, and value that buyers are looking for. When a business owner comes to a Capital Advisor for guidance, they receive information on numerous companies interested in selling and have more choices than they would have had in the past.

Capital Availability

Private equity groups, private investors, and banks have more money they want to put to use in the marketplace than ever before. Additionally, interest rates are at historic lows so borrowing capital to buy a business can be done efficiently.

Larger Companies Are Worth More

Acquiring 1 to 3 competitors and building your current company may change the multiple you get on an exit from 4x to 6x of EBITDA. Consider buying a smaller business for 3x the earnings. Later as you combine it with your business and resell the larger business in the future, you may be able to get a rate arbitrage on your purchase. Thus, the same business you bought for more than 3x. Some call this the buy-then-sell strategy.

Strategic Savings

If you own a company and acquire another one in the same industry, you could save 5 to 25 percent on expenses for the combined company. This means you could add more profit and cash flow than the prior owner. There are many expense categories that overlap. When the two companies are combined, you will not have to pay twice.

LBA Haynes Strand Capital Advisors can help you sucessfully buy a business. Contact us for a no-cost consultation!

It’s A Great Time To Buy A Business

As you look to purchase a business make sure you are doing it for the right reasons.  Don’t just say, “I want to get rich.”  That line of thinking probably won’t cut it, unfortunately.  You need to make sure you have wisdom, passion, and a sound plan for your new business.  Do your Due Diligence!!  The timing is right to purchase, in fact 2015 through 2017 may be one of the very best times EVER to buy a business.  There are a number of factors that make this the best time in history to buy:

  • Supply and Demand
  • Capital Availability
  • Larger Companies Are Worth More
  • Strategic Savings

1. Supply & Demand

As Baby Boomers are exiting their companies – there are lots of sellers, but there are not as many buyers as there were 10 years ago.  This makes the selection of businesses to buy better than the past.  Also technology has helped in this regard.  Most Capital Advisors that provide buy side searches or sell side representation have access to websites that list companies that are up for sale.  This makes it much easier to find the demographic fit, niche fit, and value that the buyers are looking for.  Therefore, when a business owner comes to a Capital Advisor they are receiving information on numerous companies that are interested in selling, and have more choices than they would have had at any time in the past.

2. Capital Availability

The Private Equity Groups, Private Investors, and Banks have more money on the sidelines that they want to put to use in the marketplace than ever before.  Additionally, interest rates are still at historic lows (however this could change slightly in 2016 – so keep an eye on this) – so borrowing capital to buy a business can be done very efficiently.

3. Larger Companies Are Worth More

Acquiring 1 to 3 competitors and building your current company may change the multiple you get on an exit from 4x to 6x of EBITDA.  The big difference here is that you may be buying a smaller business for 3x the earnings and later as you combine it with your business and thus resell a larger business in the future, you may be able to get a rate arbitrage on your purchase.  Thus, the same business you bought for more than 3x.

4. Strategic Savings

If you already own a company in the given industry and you acquire another one, the savings could be 5 to 25% on expenses for the combined company.  Which means you could add more profit and cash flow than the prior owner.  There are many different expense categories that would overlap, and when you combine companies you wouldn’t have to pay twice!

For more information on how LBA Haynes Strand Capital Advisors can help you successfully buy a business, click here for your no cost consultation!  In the meantime, click the button below to download your free report: “The Essential Guide To Successful Mergers and Acquisitions.”

How To Find A Company To Buy

Our firm receives many questions on M&A, but by far the most common question is: “How do I find a company to buy?” The answer is a simple one… start with Google and search for companies that are currently for sale. The search will most likely lead you to brokers. Within each industry, there lies a group of brokers who focus on mergers and acquisitions.

One very popular business broker firm in the Charlotte area is Viking Mergers and Acquisitions. On Viking’s website, there is a section for people looking to buy a business and another for people looking to sell their business. Under the “Buying A Business” tab, there is a business listing of all their clients who are looking to sell their business. There you go – you have your answer. It’s that simple!

What else can you do besides searching online?

I recommend trying a direct mail piece. To quote Wayne Gretzky, “You miss 100% of the shots you don’t take.”  You may never know that a company is interested in selling if you don’t ask them! Do some market research and look for companies that can add value to your business. 

What else should you look for in a business to buy?
  • Location – Do you want to enter a certain city or geographical area?
  • Lack of a Succession Plan – This one is hard to tell unless you have a dialogue with the owners.
  • Specialized Service/Product – Do you want to offer a new service or a product?
  • Culture – A similar work culture will help the merger or acquisition succeed.

Find a list of companies that fit the profile you are looking for and send them a letter or a postcard. This mailing should address your intentions, show off your background, gauge the interest of the business owner to sell, and be short and to the point. After that, it is up  to you to either follow up or foster the relationship. If you hear back from a business owner, you can fine tune your approach and learn what worked in your mailing or what you should change in order to make it more effective the next time around. You also might learn more about what kind of business owners are interested in selling and you can target similar business owners with your next correspondence.

Interested in learning more about how to find a company to buy?  We will release more blogs on this topic in the near future so stay tuned! In the meantime, feel free to reach out to the team at LBA Haynes Strand for your no cost consultation!

4 Reasons Why Now is a Good Time to Acquire a Company

Are you considering acquisition as a way to begin or expand your business? There are a number of reasons why it is one of the best times to acquire a company:

 1. Supply and Demand

As The Baby Boomers are exiting their companies – there are lots of sellers, but there are not as many buyers as there were 10 years ago – so the selection of businesses is better than in the past.

2. Capital Availability

The Private Equity Groups, Private Investors, and Banks have more money on the sidelines that they want to put to use in the market place than ever before. In addition, interest rates are still at historic lows – so borrowing capital for an acquisition can be done very efficiently.

3. Larger Companies Are Worth More

Acquiring 1 to 3 competitors and building your current company may change the multiple you get on an exit from 4x to 6x of EBITDA. The big difference here is that you may be buying a smaller company for 3x the earnings and later as you combine it with your business and thus resell a larger business in the future, you may be able to get a rate arbitrage on your purchase. Thus, the same business you bought for more than 3x.

4. Strategic Savings

If you already own a company in the given industry and you acquire another one – the savings could be 5-25% on expenses for the combined company. This means you could add more profit and cash flow than the prior owner. There are many different expense categories that would overlap, and when you combine companies you would not have to pay it twice.

M&A Tip: As you look to acquire or buy a business make sure you are doing it for the right reasons. Don’t just say, “I want to get rich.” That line of thinking probably won’t cut it, unfortunately. You need to make sure you have wisdom, passion, and a sound plan for this business. Do your Due Diligence! The timing is right to acquire, it’s just up to you to follow through!

For more information on how LBA Haynes Strand can make your acquisition a successful one, contact our Capital Advisors team!