Buying a Business
Del Lingco International specializes in the sale and valuation of mid-sized privately held companies. Established in 1958, Del Lingco has helped thousands of entrepreneurs and corporate acquirers and merger partners find a successful business. We know the necessary steps to complete a business transfer and we will be there for you along the way.
Advantages of Buying a Business
- Ability to review actual financials and existing growth rather than a pro-forma of a startup.
- Seller training and transition.
- Immediate cash flow and therefore reduced working capital requirements.
- Established suppliers and credit. Existing licenses and permits.
- Sources of capital to purchase an existing business are more available than with startups.
- Trained employees in place.
- Established customer base.
Steps in the Process
- The first step in the process will be a personal interview in the office with your Del Lingco Associate. He or she will discuss the business offerings with you but only after a standard confidentiality agreement has been signed. The discussion will also ascertain your goals, desires, financial capability, work history and the type of business you would be comfortable owning.
- Based on your qualifications and criteria, a number of businesses will be discussed and you will select which businesses you would like to pursue.
- Your Del Lingco associate will schedule a meeting with the seller. It is imperative the Del lingco associate accompanies you to the business. Usually, this occurs when the business is closed for confidentiality reasons. Remember that the employees do not know the business is for sale and any premature disclosure could cause harm to the business you are buying.
- At the meeting, feel free to discuss operational questions with the seller but do not discuss financial matters. This is not the time or place. Please keep all proprietary information regarding the business confidential. Only discuss this information with your professional advisors and spouse and remind them of the confidentiality aspect.
Making the Offer and Due Diligence
At this point you have reviewed the financial information on the business, visited with the seller and have had your questions answered. You are now ready to make an offer. Your Del Lingco associate will advise you that we represent the seller, not the buyer. Also, we will suggest you utilize an accountant for the due diligence and advise you on tax and records of the business. We will also suggest you retain the services of an attorney for legal and organizational requirements. Your Del Lingco Associate will use a standard Purchase and Sale Agreement. This agreement covers the basic and necessary elements of a business transfer. It also provides important contingencies, which must be met by certain time frames in order for this process to go forward. For example:
Books and Records
The agreement specifically includes a contingency that all financial records will be made available and buyer must be unconditionally satisfied. Put simply, you will not be required to buy the business unless you are satisfied with the financial records and representations.
The agreement specifies the lease will be assigned or a new lease written in a manner acceptable to the buyer.
Equipment and Fixtures
All equipment and fixtures will be in working order and free of debt and liens.
All inventory must be saleable and of sufficient quantity. The sales price will be adjusted according to the inventory valuation at cost.
Training and Transition
The agreement provides for the owner to train the buyer at no charge, for a certain period of time.
The Purchase and Sale Agreement must include Earnest Money to be valid. The amount will depend on the size of the business. Typically, for small to mid-sized businesses the amount will be $5,000 to $10,000. The business will be taken off the market once accepted by the seller. The Earnest Money will be promptly refunded if the contingencies are not met to the buyer’s satisfaction. If the contingencies are met and a closing is scheduled, the Earnest Money will be credited and subtracted from the down payment or cash due at closing.
The Closing Process
Once all the contingencies are released the escrow attorney will perform lien searches and prepare the closing papers. Both buyer and seller are advised to have the papers reviewed by their attorney. Your Del Lingco Associate will coordinate all aspects of the closing process to insure all the necessary documents are produced and completed by the closing date. The cost of the closing papers are usually split between the buyer and seller, and the seller is responsible for the Brokers fee. Del Lingco takes great pride in helping business buyers achieve the American dream of business ownership. We, too, are entrepreneurs and appreciate and love the freedom and satisfaction that can only come from owning your own business. You will never work for anyone again.
Congratulations. You are now on your way!
Once a confidentiality agreement is on file, you will be entered into our database and we will contact you information about new listing opportunities.
The information contained herein has been obtained from the Seller and other sources deemed to be reliable. No representation is made by Del Lingco International regarding the accuracy or completeness of this data.