If you want to buy into a business, it requires good preparation. Whether it is a management buy-in or a management buy-out: this is how you buy into a business.
Buying a business is often more interesting than starting a business from scratch yourself. Products, customers, suppliers: it's all already there. It involves less risk and contributes directly to profit, revenue or increased market share. In addition, research shows that acquired businesses do significantly better after acquisition. The ideas and energy of the new owner have a positive impact on the performance of the business.
Management buyout
If there is one or more employees within the organization who buy into the business, this is called a management buyout (MBO). This often involves the second-in-command, a manager in charge of a division of the company or the current management team (the second echelon). A special form of management buyout is the family transfer: one or more family members take over the business.
For a long time it seemed that an MBO was only reserved for large businesses. This involved divesting a loss-making division or a division that was no longer part of the core activities and selling it to the incumbent management. But today, a management buyout is a viable option for small and medium-sized businesses as well.
Management buy-in
A management buy-in (MBI) involves an outside buyer. Although until a few years ago a management buy-in was seen by many sellers as something of a last straw, this form of transaction has recently been gaining in popularity.
The classic MBI candidate is often a (former) manager of a listed or large company. He is done with the many meetings, the cumbersome decision-making process and the lack of entrepreneurship within a large organization and wants to be at the helm himself. But starting for himself by setting up a business from scratch is not for him. Buying a business is an ideal "flying start" for him. These managers often have the necessary resources in the form of a golden handshake or an extra mortgage on their house to take over (part of) a business.
3 Important aspects
Buying a business is an exciting, intensive and often emotional process. Moreover, it is not settled in a few months: an acquisition process takes a year to a year and a half on average.
1. Know what you are looking for
Before you actually start looking, good preparation is essential. First of all, you need to know what you are looking for. Many prospective buyers search at random and respond to very different profiles on the Internet without a clear plan. Those who do not know what they are looking for will not find it.
Another common mistake is that searchers are too quick to pin themselves down to a particular industry or company size. For example, the prospective buyer comes from the telecom industry and wants to buy a business in the same industry at all costs. This seems logical, but it also limits the options.
2. Check your financial resources
Secondly, it is very important what your own financial possibilities are; whether or not supplemented by investors in the background who want to join you. Count on having to bring in at least half of the required acquisition sum from your own resources.
3. Discuss your plan with your surroundings
Finally, in the preparatory phase it is very important to discuss your plan to buy into a business with those closest to you. How does your family view your plans, what does your partner think? Do they understand what you want and why you want it, do they support you in your adventure even if it doesn't work out? If you are the breadwinner, do you have enough reserves to last for a while without income, and what is your plan-B if the process takes longer than anticipated?
In practice, it still happens that the partner is involved far too late in the process. The prospective buyer is already busy with advisers, has even already visited a business, and at the moment the first negotiations start, it turns out that the partner does not support the plans. The buyer withdraws from the buying process with an excuse and relations with the advisers hired are ruined forever.
Also discuss your plans with friends and your business network. The search for a business can be lonely and frustrating. It helps if your personal and business network knows what you are doing, so they can support you if needed.
You determine your own success
And let's not forget the most important person in this story: you! As mentioned, be prepared for an intense and intensive period. Especially if you also quit your regular job with all the securities that come with it, you will be thrown back on yourself completely. Your surroundings can support you, an acquisition advisor and a good business network can help you, but ultimately you will have to do it yourself. After all, you are self-employed!
