Executive Suite: 7 Steps to Buying a Business

So, you want to buy a printing business. The world of business buying and selling is one in which I spend much of my time. Some people find it scary and mysterious. It doesn’t have to be. In conventional transactions there are seven basic steps involved in buying a business.

1. Find the Right Printing Business

Although there are lots of sources—from your local printing association to Craig’s List—it is very important to realize businesses are sold on websites. Google “businesses for sale” and you will find well known sites such as BizBuySell, for example. This is where the action is.

The transaction will often involve a business broker—a licensee who helps owners buy and sell businesses. He will likely need some information to serve you more effectively. This may include how much cash you have available to make a purchase to be sure you have the capacity to at least make a designated down payment. On large transactions, the broker may also inform you that the seller requires proof of a buyer’s funds prior to the release of information on their business listing.

 

2. The NDA

In most cases, you will be asked to sign a confidentiality agreement also known as non-disclosure agreement (NDA) before the inside data on the business is released to you. Sellers do not want to risk having their employees, customers or clients, and suppliers knowing that their business is for sale.

 

3. Review the Confidential Information

With the NDA signed, you will receive the confidential business information the seller provided at the listing. This will include any and all financial documents on file. If you are interested in moving ahead, the broker will set up an appointment for you to meet with the seller at the business. If you live in another state, the first conversation may be by phone.

 

4. The Buyer/Seller Meeting

The seller is the “real” salesperson; the broker is usually present as the “catalyst” to keep things focused and moving. It is important to ask the seller as many questions as possible to get as full an understanding of the business as possible. You may want to meet again or get some additional financial information to review.

 

5. The APA

If you want to make an offer, the next step is to complete an asset purchase agreement (APA). The APA may—like a real estate deal—contain contingencies on which the offer depends. These may involve a lease, proof of financial documents, or other items. The APA will also include a proposed closing date.

You will usually need an earnest money deposit check (EMD) usually equal to a percentage of the price because, for an offer to be valid, it must include what is termed “consideration.” This check is turned over to a third party (often an escrow or transactional attorney trust account), after the offer is accepted by the seller.

The seller may accept, reject, or counter your offer. A counter offer commonly implies that the seller accepts some or most of the buyer’s offer, with certain exceptions. The counter offer contains the desired changes and is signed by the seller and presented to you. You then can accept, reject, or counter back an offer to the seller.

Once the offer and any counter offers have been accepted, the broker will open an escrow account with the buyer’s EMD.

 

6. Due Diligence

We now move to due diligence. The seller must deliver all items stipulated in the APA for due diligence. In simple terms, due diligence involves verifying that the business is (usually financially) what the seller has purported it to be.

Once you receive the information, you will have a reasonable period to review it. The information is then approved or rejected. If you are satisfied with these records and any other requirements (contingency), the transaction moves forward.

 

7. Closing the Deal

It is time to close. The broker will customarily meet you and the seller at the escrow office. The escrow company will have completed searches for lawsuits, liens, and taxation issues. With funds transferred, you will then receive title to the business free and clear of all liens and encumbrances.

You and the seller will sign the escrow company’s necessary forms and the transaction is then complete. Congratulations! You are now the new owner of the printing business you wanted.

 

Dr. David Claerbaut has spent more than 25 years consulting in the graphic arts industry. You can reach him directly at 702-354-7000 or email him at drdavid@fcbb.com. Learn more at www.MyPRINTResource.com/10746916.

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