A. Colin Mills writes:
Buying a business during a downturn can be a great thing to do – I’ve recently done just that myself. There are a number of things going for you that don’t exist in more normal times. First, pricing is more realistic, while there are less people wanting to buy, presenting opportunities you might not otherwise get. Some competitors will have overstretched themselves and will be looking for a quick exit to prevent the business failing, and as they will have less time to prepare, you could get a good deal. Also, a depressed market and doom-laden news stories encourage some business owners to seek retirement.
As with any acquisition, however, you need to carefully weigh up the reasons for and against. Make a list of pros and cons, and test your thinking against your own experience. Then consult trusted advisers, particularly if you’re not used to buying businesses. Don’t just ask people who will agree with you, as this won’t test your sanity or logic very well.
Work through commercial arguments and the numbers. Consider how things will actually work if you joined your businesses together and how things can be re-structured to reduce costs. Finally, determine what the cost of re-organisation will be and how much financial risk there is if things go wrong.
It is important to understand how the cultures of the businesses will fit together, what the people issues will be and whose egos you need to manage. Also, determine what the distraction to your existing management team will be and if they have actually got the energy to handle it.
When it comes to borrowing money to do the transaction, if the deal is good enough and your business is strong enough, you can find finance, as long as you have access to people with experience in raising funds. Good firms of accountants or an experienced finance director or non-executive will know where to look.
Buying any business at any time is never for the faint-hearted, but if your own business is in decent shape and this deal doesn’t stretch you too far, now can be a great time to do it.
Colin Mills is the founder and managing director of the FD Centre, the leading provider of part-time finance directors, available to growing businesses. www.thefdcentre.co.uk