Buying a business is a complicated process. From valuation to book research and tax aspects; most business owners have little experience with it. You won't be able to avoid using one or more advisers. We list the main advisers to a business acquisition.
It depends entirely on the size and complexity of the transaction which advisers you involve in the acquisition process. Sometimes an intermediary or acquisition advisor can do just fine on his own. In other cases, he will hire other experts as needed.
If you don't hire an intermediary and take the reigns yourself, you will need to hire your own advisers. With a small strategic acquisition, the in-house accountant may suffice; a large management buyout may require a small army of advisers. These are the most common advisers in a business acquisition:
- Takeover consultant
- Accountant
- Tax specialist
- Due diligence expert
- Valuation expert
We explain them in more detail below:
Takeover consultant
Many intermediaries, but certainly the specialized acquisition advisors, will guide you through the buying process. They play a central role in the process, can value the asking price, know how to negotiate, understand financial, tax and legal issues, and can involve other advisers from their network in the purchase where necessary. They offer a one-stop shop.
Tip: The profession of acquisition advisor or intermediary is not protected. This attracts cowboys, especially in a growth market. So be careful when selecting an intermediary: ask about deals he has done recently and simply call the entrepreneurs in question. There are no better references.
Accountant
The core quality of an accountant in the acquisition process is analyzing the numbers of the acquisition target. In addition, the accountant is often involved in the valuation, due diligence and tax structuring of the deal. Just be sure that the accountant you hire is versatile enough to take on these latter roles as well. If not, engage specialized parties.
Tax specialist
In the entire buying process - from initial preparation to closing the deal - tax issues play an important role. By choosing the right structures, you can save a lot of money . Accountants and intermediaries have sufficient basic knowledge, but the tax specialist is pre-eminently the one who can advise you in detail on tax matters.
Lawyer
A lawyer is the right person to draft contracts, such as a letter of intent, a purchase contract and a non-compete agreement with the previous owner. During due diligence (see below), a lawyer can analyze existing contracts of the selling party, such as employment contracts, leases, supplier agreements, patents and the like.
Tip: Don't just choose a lawyer with expertise, but one with the right mindset.Rather a lawyer who is reasonable and willing to compromise than a hoodlum who likes nothing better than litigation.
Due diligence expert
Due diligence is one of the most important phases in the acquisition process. This is because in this phase you get answers to the question of whether you are actually buying what you think you are buying. A due diligence expert is often originally an accountant, tax expert or lawyer who has specialized in this field. Some limit themselves to fiscal or financial due diligence, for example ; others can do the full due diligence for you, whether financial, fiscal or legal.
Other forms of due diligence are also common, such as a commercialOr, in the case of an ICT business, software due diligence. Depending on the transaction, other specialists may also be involved in the acquisition due diligence. Consider a real estate appraiser to determine the value of the business premises, a machinery appraiser to determine theactual value of machinery or to an environmental specialist to do soil testing. Furthermore, an insurance expert or actuary can be called in toFigure out complicated pension issues.
Valuation expert
The value of a business is difficult to objectify. Over the years, numerous valuation methodologies have been developed that in practice lead to just as many different outcomes. Professional valuation experts commonly use the DCF (discounted cash flow) method to determine the value of a business. Hiring a valuation expert is especially useful for assessing whether you are paying too much.
Hiring such a business valuator is not common practice in small and medium-sized businesses, partly because of the relatively high costs. Sellers sometimes use a valuation report to justify their asking price. There are over one hundred registered valuers active in the Netherlands, who have united in the Netherlands Institute of Registered Valuators (NIRV).
Cost of advisers.
Advisers don't come cheap. For an accountant, tax expert, lawyer or business valuator you can easily pay 150 to 300 euros per hour, with peaks of 600 to 700 euros per hour in the upper end of the market. Large firms tend to be more expensive than small ones.
The total cost of outside advisers can add up quickly. For example, a business valuation by a registered valuator typically costs between €7,500 and €15,000. A modest due diligence of a few days costs a few thousand euros; a comprehensive due diligence a multiple of that.
A two percent success fee for a purchase price of one and a half million euros amounts to as much as 30,000 euros. It is no exception for a prospective buyer to spend tens of thousands of euros on advisory fees. With a large MBO, advisory fees can amount to more than a ton.
Tip: make good arrangements with your advisers and be on top of things. Prevent costs from getting out of hand. An advantage is that advisory costs are tax deductible to a large extent and can in principle be included in the financing of the purchase.
