Buying a Business

You’ve gone over the company’s financial statements with a fine-tooth comb and you’re about to make a decision on whether you want to make an offer to buy that company. Stop right there! The numbers tell you only half the story—the more obvious half. Every company has hidden assets and liabilities that, although less visible, can add substantially to the risks and benefits of acquiring the business. Here are the initial areas to check out.

  • The owner. What to ask: Why is he or she selling the company? What does he want from the deal? How important is he or she to the continued success of the company?
  • The executives. What to ask: How critical are they to the continued success of the company? How productive are they? Are they near retirement? Will they stay with the company? What are their benefits; are the amounts reasonable?
  • The property. What to ask: Is the company facility owned free and clear? If it is rented, how long does the lease have to run? Is the lease—including all provisions, e.g., and option to buy the property—transferable to a new owner? Are there any zoning regulations in the area that would restrict any planned expansion? Is the property adequately insured? What is the age and condition of the equipment?
  • The products. What to ask: What does each product represent as a percentage of sales? What is the gross profit margin per product? Are there any licenses, patents, or exclusive rights to sell the products? When do they expire?
  • The customers. What to ask: How reliant is the company on any one or a few customers? What percentage does each customer represent of total sales? Are the principal customers to whom the company sells financially sound? How long have the same customers been buying from this company? How loyal are they to the current owner?
  • The employees. What to ask: What is the average age of the employees and the average length of time with this employer? Is the company overstaffed? Are there any unions or threats of unionization? Have there been any work stoppages, strikes, or arbitrated settlements of worker grievances? What is the pension plan liability?
  • Personal questions. What to ask yourself: Why am I buying this business? Does it fill a real business need? How many years will it take me to recoup the purchase price? What is my return on investment? Do I have the time to manage the acquired new business?
  • Representation. What to ask yourself: Should I have legal representation to acquire this business? Do I feel comfortable with the documents prepared by the broker?

Laska Company performs basic duties when dealing with a buyer, or “customer”. We direct you to consult your attorney. You can expect us to provide the following customer-level services:

  • To assist you in the purchase of a business using reasonable skill and care;
  • To perform these acts in good faith, honesty, and fair dealing;
  • To properly account for money or other property you place in our care;
  • To disclose “adverse material facts” which are, or should be, within our knowledge. These include facts that would significantly affect the desirability or value of the business to a reasonable person, and facts that would indicate to a reasonable person that one of the parties cannot, or will not, complete his obligations under a contract.