That’s a fantastic business!
If I had the financial resources, I would go talk to the owner tomorrow.
So, what’s preventing you?…
In 2016 we started providing some answers to your questions through this medium.
Many of these questions have to do with financing or finding a suitable investor.
Or preparing for the acquisition or sale of a business or a company.
Whenever we get an interesting question, and if the answer to which we think could be valuable to others.
Then, we will publish it here in the form of an anonymous message and accompanied by our answer.
The question of the day!…
Hello Gerard,
There is a business in my neighbourhood whose new owner I would like to become.
I know from a reliable source, that this business is facing what you always refer to as a succession issue.
Well, I have discussed this with two of my ‘advisers’.
They know my financial situation, and both of them have told me that I don’t stand a chance of success.
Not if I am unable to produce sufficient capital.
What do you think?
And, if you do see an opportunity for me, could I call on you for assistance?
Thanks for your help out and all the information you put online!
F. from R.
Our answer to your question!
Dear (prospective) Entrepreneur,
I know from experience that this is a discussion that is raised very frequently whenever a private individual reveals an interest in a business.
Many ‘advisers’ engaged in the sale and acquisition of companies tend to tell potential buyers that if they are unable to contribute equity capital. Then nobody will want to negotiate with them and that further discussion would be senseless.
But: are they telling you this from the perspective of the seller, or from their own perspective?
Of course, their interests will not always correspond to that of the seller, although the seller may think they do.
Unfortunately, this opinion is usually voiced by a specific group of ‘advisers’ who simply don’t have enough experience!
Hands-on or otherwise, also in the field of acquisitions!
Although their websites would make you think otherwise.
Or they believe that they are in a better position to make a decision than their client.
Personally, I am living proof of a person who once acquired a company without having contributed any capital myself.
(Seriously, not a cent!)
What’s more, I know several other people who have done this as well, and some of them even more than once.
In one of these cases, the reason for the business transfer was related to tax issues.
Issues that nobody could have foreseen at the time.
The reason why I did not contribute any equity capital was simple: I did not have any at the time!
In other words, saying that no capital is contributed does not necessarily mean that no capital is being contributed.
Can you still follow me? This capital could be provided by somebody else: an informal investor (Angel) or an equity firm.
This means that your acquisition will still be financed by equity capital.
The only difference is that it won’t be contributed directly by you but through you.
If this is a good deal, and it sounds like it is, I’m sure you will find a financier willing to back you.
There are also certain cases – although I don’t know if the company you want to buy is one of these – where the owner is desperate to find a solution for the succession issue.
Considering that he clearly hasn’t found one yet!
And no: this doesn’t always concern insolvent companies.
I have even come across situations like these with companies that are debt-free!
How to proceed?…
Go and talk to the owner!
If the seller doesn’t know that you exist, he won’t be able to make you an offer or a counter offer!
Try to find out what the actual state of affairs is.
Are they already negotiating with prospective buyers, or not at all?
Perhaps you could take over just one part for the time being, and the rest later on.
Maybe the owner would like to play a part in the financing. Most owners do that anyway.
Or you could start in a management position and start taking over shares in a few years.
Of course, we would love to help you achieve your goal!
This is why we write so much about this subject here, after all.
Let us know the details of the company and, taking that as a point of departure, we will take a look at what is possible for you!
We wish you the best of luck in talking to the seller.
Let us know if we can assist you in this exciting new venture.
Follow your dream!
Gerard Hofmeijer
