When to reconsider your business purchase.

Depending upon whether you are in the search process or whether you’ve progressed beyond that stage, there are some issues, that if they arise, you may wish to consider before proceeding with the purchase.

• It’s proving too difficult or taking too long to get relevant financial information.

• There is a high staff turnover

• The sellers can’t identify where the future development potential might lie

• There are unusual “items” listed in the IM document which can’t be justified  

• You get a sense that the sellers are looking for an inflated price, which could cause you an issue with debt funders who have stringent lending criteria

• After Heads of Terms (HOTs) are signed, the sellers indicate that they are looking for more than has been previously been agreed.

• There is a considerable gap between your valuation and the seller’s price expectations

• There are issues coming out of a due diligence exercise which are troubling to funders

• The business isn’t sale ready, it needs improvements to operations, people or processes to get it into a sale ready position before a transaction can progress

• The sellers won’t entertain deferred consideration.   

As a cautious reminder, once you begin to engage third party professionals, e.g. lawyers, corporate financiers, accountants and due diligence experts, you will be paying for their time, regardless of whether you complete the transaction. Research as much as you can!