Buying a Business / Investing in an SME - Where to look?
In my last blog, I talked about the confusion and concerns regarding traditional investment methods, and the (current) low rate of return from cash. This may lead to a rise in SME transactions.
People looking to buy SME businesses need to look at a variety of sources, as they are not listed in the Financial Times like stock exchange businesses! I will break it down into acquisitions and investments (my next blog):
Acquisition of businesses
In these purchases, the buyer will take a management role in the business (as opposed to an investment, where the involvement will range from ‘none’ to a sporadic / non-executive role). The current owner will hand over the reigns to the buyer, although he or she may be tied in via an earn out.
A Corporate Finance advisor can perform a search on your behalf, and this will be the most productive method of identifying suitable businesses. There is generally an upfront cost involved, and this reflects the advisors’ experience and ability to add value to the process.
For someone outside of corporate finance, one of the most common sources of such businesses are website directories – essentially databases of businesses. It is usually a case of entering parameters – location, size, amount etc, and the sites will then provide a list of suitable possibilities.
Probably the best known site is Daltons – the website of the well known Daltons Weekly publication. Daltons have over 30,000 businesses for sale.
Businessesforsale.com, is an international site, with opportunities in a number of countries. It has a useful mid-market section, which includes businesses at the upper end of the SME market. There are many other sites, as you will find from entering ‘buy a business’ or a similar term in Google.
Another source of businesses for sale are professionals – speak to your lawyer and accountant – they may be able to consult their ‘black book’!
Date: 24th February, 2009
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