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Acquisition entrepreneurship, a different path

While there are many routes to success in business, the more traditional paths can largely be split into climbing the corporate ladder or to strike out on your own and start a business.

While not a new idea, the concept of acquisition entrepreneurship has gained traction in recent years and is creating an alternative path for those wishing to take another route; that is, to buy an existing business.  

There are a host of benefits to taking this path which we explore below, however there are risks and challenges that you must consider - ones that you are less likely to face with one of the more traditional routes. 

What are the benefits of buying an existing business? 

  • control - When you buy a business, you have instant control and a free choice of role and title. There is no need to spend years climbing the ladder and waiting for your perfect job to be vacant.
  • salary - Unlike startup entrepreneurs who often work long hours for little financial reward in the early years, an established business will often have existing cashflows that allow the owners to take a salary or dividend from day one. With an established team, the workload can be more evenly distributed.
  • reduced risk - Startups have a relatively high failure rate, and while change of ownership is a riskier time for any business, the customers and employees of the established company greatly improve the chances of making it through the first few years of ownership.
  • expertise from previous owner(s) - Sellers are often happy to remain involved on a reduced basis. This allows the new owners to benefit from their expertise and experience while also having control and the ability to take the business in a new direction.  

Risks and challenges of buying an already existing business

  • Negotiating and funding any acquisition can be challenging and will almost certainly involve taking personal financial risk. This is balanced with having existing cashflows which may allow the buyers to use debt and/or deferred payment to fund a significant amount of the transaction. However, these create additional financial obligations which can increase risks in the business being purchased. 
  • Potential buyers will benefit greatly from previous business experience. A lack of core business skills in finance, people management and operational ability can be a major issue for business buyers who have not developed these skills.
  • Running a successful business is hard work and requires good decision making. While rewarding, it is challenging and will have ups and downs.
  • Finding the right business to buy can be difficult. Good businesses are in demand and may not come to the open market on a regular basis, and marketing is often done quietly so staying close to M&A professionals will be key in finding these opportunities. 

The next step

If you are interested in buying a business, either as a bolt on to an existing business or as a new venture, UHY can help guide you through the process, and assist you in finding the right business, structuring an offer and finance, through to completion. Please contact Robert Magee on r.magee@uhy-uk.com, or visit our corporate finance page to get in touch with a local UHY expert.
 

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