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| Author: Peter Viliamu |
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- Decide to investigate
You make the decision to look for a business to buy. You then check out businesses in the newspaper or by working through a business broker. - Confidentiality
If working through a broker, you will sign confidentiality agreements, ensuring the details of any businesses disclosed to you are kept private and confidential for the purpose of assessment of the business alone and revealing nothing to any other party. - Meet with the broker
Set up a meeting with the broker where the broker will pass over a business profile, which is documentation containing full information about the business. - Look over the business
Your broker will take you to the business premises and will show you through the operation for sale. Sometimes the seller is not present and it will be left to the broker to act on the seller's behalf. - Meet with the owner
Eventually you will meet with the owner, where further questions may be answered. - Letter of intent
If you want to continue to the next stage, you may have to give a letter of intent to the seller and pay over a small deposit. This will allow you to have access to some of the information you need for your investigation without committing yourself to the purchase. - Carry out due diligence
Once a letter of intent has been accepted by the seller you will be given access to all areas of the business and you can carry out full due diligence. This is a method whereby you can investigate any area of the business to see whether the business interests you. - Make an offer
You have now satisfied yourself from your due diligence that you want to proceed to buy. An offer is made, which is presented by the broker to the owner. - Offer presented
The broker takes the offer to the seller and the seller will either accept the offer or come back with a counter offer for you to agree to. - Check counter offer
If the seller is not happy with your offer and a counter offer is brought back by the broker, you will need to make a decision whether to accept the counter offer or make one further adjustment. Generally you cannot make a counter offer to a counter offer because it will extinguish the offer and if you want to make changes then it will become a new offer. - Acceptance
You have now both agreed on the final details and the offer is accepted by you, as well as by the seller. There is now in effect, an agreement between both parties and it becomes a purchase and sale agreement which can still be conditional on a number of factors, such as finance being arranged, or a certain contract being approved, or the lease being assigned, etc - Sale and Purchase agreement finalised
The agreement is drafted up and sent to you for your approval and acceptance. You will then sign it and send it back to the seller, who will sign both copies. - All conditions met
Once all the conditions have been satisfied, the agreement will become unconditional and it is then a matter of waiting until the final date for settlement. - Lawyers finalise things
After the contract becomes unconditional there is nothing further for either party to do except allow the lawyers to complete all other documentation, such as lease assignments, finance documentation, employee contracts, etc. - Close and settle
On the date of settlement the lawyers pass over the cash to the seller and the business and the keys are passed over to you, as the buyer, from the seller's lawyer. - Stocktake
Prior to settlement a stocktake is usually taken, and after settlement any variation in the value of stock arising from the actual stocktake compared to the value taken into the agreement, will be made. Usually a cheque will be passed over from one party to the other for this. - New owner starts
The new owner will now commence the business and sometimes the old owner works alongside the new owner to train and show the ropes for a period. - Training and Support
Many deals require the old owner to give the new training and full support for a particular period.
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