What You Need to Know About Foreign Buyers
There is a potentially lucrative group of buyers that many sellers don’t initially think about. We are talking about foreign buyers. While there are some hurdles to working with these types of buyers, it is important to note that there are many huge advantages as well. Let’s take a closer look.
How Are Foreign Buyers Different?
At the top of the list of ways in which foreign buyers are different is that they are often seeking a visa. Another commonality among foreign buyers, one that will surprise many, is that they may want access to the U.S. educational system.
It is common for foreign buyers to want to buy a business so that they can get their children into a particular U.S. school district or college. Sometimes the desire to be eligible for state tuition also plays a role in the selection of a business and the decision-making process. In this sense, business location takes on a level of importance that it might not have for domestic buyers.
It is important to keep in mind that there are cultural and business differences that play a role with foreign buyers. Everything from a different use of business terminology to expectations can play a role. This could impact negotiations.
What About Visas and Immigration?
One of the most important things to remember is that foreign buyers are often navigating the complex world of visas and immigration. Whether or not a visa is issued can dramatically impact whether or not a deal ultimately takes place. This fact is often built into agreements. For example, a purchase condition may be conditional upon visa approval. Nonrefundable deposits may also play a role in the process.
What Do Foreign Buyers Really Want?
Foreign buyers have been impacted by the pandemic too. Yet, some factors remain unchanged. Not too surprisingly, they will want to see that a business is profitable. In this regard, you should be able to showcase profitability in a clear fashion. You can expect foreign buyers to want to see tax returns and all the typical documentation that you’d need to provide to any buyer.
A second factor that foreign buyers are interested in is longevity. If your business has successfully operated for decades, this will be a major advantage.
Ultimately, most of what domestic buyers are looking for in a business will translate over to what foreign buyers are seeking as well. With that stated, however, there are factors that are often unique to foreign buyers. As mentioned above, navigating the often-complex visa process can add a wrinkle to the entire process.
Copyright: Business Brokerage Press, Inc.
The post What You Need to Know About Foreign Buyers appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from Milwaukee Community Journal entitled “4 Factors To Consider Before Buying An Essential Business In COVID Times” discusses a rising interest among buyers in essential businesses. The COVID-19 pandemic has many buyers rethinking what type of business they might want to own, often turning to those deemed essential such as grocery, delivery, cleaning and home services.
When looking into buying an essential business, consider the following suggestions:
- Focus on successful types of essential businesses, those that are more likely to succeed even when economic conditions are poor
- Consider franchise opportunities which offer training and support
- Be able to decipher between a bargain and a bad investment
- Make sure that owning a business is right for you and that you are right for the business
Click here to read the full article.
A recent article from Forbes entitled “Deal Terms To Reduce The Risk When Buying A Business Now” explores the current state of the market and what it means for those looking to buy a business.
The market is presently filled with unknowns, both short term and long term. It is important to realize, however, that the stock market shouldn’t be treated as a barometer for main street small businesses. The buyer must evaluate each individual opportunity based on its unique circumstances and how those circumstances relate to the larger economic environment.
When evaluating a distressed business, it is important to consider how distressed the business is and what capital it will need from you as the new owner to weather the storm.
When evaluating a business that has remained strong, the reality is that multiples (and selling price) will likely remain steady. However, funding is limited with SBA resources tied up in stimulus lending. This leaves two likely ways to finance a deal – all cash (at a possibly reduced price) or seller financing. Buyers should also consider including earnouts in the deal to help protect themselves.
Click here to read the full article.
A recent blog post from Viking Mergers & Acquisitions entitled “3 Reasons Entrepreneurs Want to Sell Their Business” identifies three major reasons why business owners decide to sell.
These three reasons include:
- Burnout – The workload that comes with owning a business can be overwhelming, and many owners just put more into the business when they feel the demands growing, often leading to burnout.
- Desire to do something different – Eventually a business owner may become bored with the business and put less effort in, leading to burnout as they try to manage the business while feeling detached.
- Retirement – Many business owners put years into developing and growing a successful business, and selling that business is their retirement plan.
Click here to read the full article.
Read More
Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent article from Inc. entitled “Small-Business Acquisitions Pick Up Steam With High Demand for Thriving Businesses” discusses acquisition activity and opportunities for buyers coming out of Quarter 2 in light of COVID-19 economic conditions.
While the beginning of Quarter 2 saw widespread mandated closures of businesses and an abrupt pause on deal activity, the end of Quarter 2 saw businesses reopening and deal activity resuming. Some businesses have struggled, some have maintained a relatively normal financial picture, and some have thrived. This varying financial state of businesses has presented a variety of opportunities for buyers.
Essential businesses may be appealing to buyers due to their resilience and growth opportunities. However, buyers may have to pay a premium for these businesses.
Distressed businesses are those that are facing financial challenges but may be able to rebound over time. These businesses may be appealing to patient buyers who are prepared to meet cash flow shortages and are looking to buy at a discount.
Some businesses may be forced to conduct an asset sale, presenting an opportunity for buyers to acquire prime real estate, FF&E, inventory, and other material assets.
Click here to read the full article.
A recent article from Financial Planning entitled “5 tips for helping business owners sell during a pandemic” offers advice for business owners who have decided that now is the time for them to exit their businesses.
This advice includes:
- Know the company’s valuation
- Focus on cash flow
- Engage employees and tap into their growth ideas
- Avoid shiny new business opportunities and focus on long-term growth
- Focus on the four intangible capitals – human, social, customer, structural
Click here to read the full article.
A recent article from Herald-Tribune entitled “Are you ready to sell your business?” discusses what motivates business owners to sell, what selling options exist, and why so many businesses never sell.
Push factors that lead to the decision to sell include cashing out, peaked market, need to diversify, health concerns, retirement, stress and boredom. Pull factors include philanthropy, starting a new business, hobbies, improving health, family and travel. In general, the presence of more push factors than pull factors is more likely to lead to regret after the sale.
Selling options include an outright sale, transferring ownership to a team, selling only part of the business, transitioning to children, and liquidation.
Of businesses that survive ten years, more than half will never sell and instead shut down. Businesses may not sell due to unreasonable buyer or seller demands, seller misrepresentation, economic uncertainty, lack of capital to finance, insufficient cash flow, no market, or a valuation gap in pricing.
Click here to read the full article.
Read More
Around the Web: A Week in Summary
The following information has been sourced by Business Brokerage Press for the benefit of the business brokerage community. The views of these articles do not necessarily represent the views of Business Brokerage Press. We hope you find this information helpful.
A recent podcast episode from The Sustainable Business entitled “Selling Your Business During Pandemic – Barbara Taylor” discusses selling a business and buying a business amidst the current pandemic.
In the episode, Barbara Taylor explores topics including:
- The M&A world during the pandemic
- Why it’s an excellent time to buy
- Who can help you buy or sell a business
- How the pandemic impacts the business sale process
Click here to listen to the episode.
A recent article from JD Supra entitled “Is Now a Good Time to Acquire a Business? Opportunities and Risks for Buyers in the Era of COVID-19” discusses the effects of COVID-19 on buying a business.
Current economic conditions have led to a more favorable environment for buyers who are well-positioned to make an acquisition. Deal volume is down and many previous buyers have put their activities on hold, meaning there are more opportunities for those who are ready to buy. There are also a significant number of businesses that have been negatively impacted financially and may be motivated to sell.
Despite these favorable conditions for buyers, there is also ongoing economic uncertainty and associated risks. Buyers should take a measured approach with heightened due diligence, thorough risk identification, and strong documents and recourse. Plus there are unique considerations related to CARES Act loans.
Click here to read the full article.
A recent blog post from Viking Mergers & Acquisitions entitled “Key Mistakes to Avoid When Selling Your HVAC Business” discusses critical pitfalls that can impact the value of your HVAC business and hurt your chances for a successful sale.
These key mistakes include:
- Failing to set the business up to operate without you (the owner)
- Putting all of your eggs in one basket and not diversifying your services
- Having inaccurate or incomplete financials
- Not having a 5 year plan
- Allowing past due receivables to get too old
- Not getting key team members on board with working with a new owner
Click here to read the full article.
Read MoreEssential Meeting Tips for Buyers & Sellers
The buyer-seller meeting is quite often a “make or break” meeting. Your business broker or M&A Advisor will do everything possible to ensure that this meeting goes as well as possible.
It is vitally important to realize that rarely is there an offer before buyers and sellers actually meet. The all-important offer usually comes directly after this all-important meeting. As a result, you want to ensure that meetings are as positive and productive as possible.
Buyers need to understand how the process of selling a business works and what is expected of them from the process. Buyers also need to understand that following their broker’s advice will increase the chances of a successful outcome.
Sellers should be ready to be honest and forthcoming during the meeting. They also want to be sure to not say or do anything that could come across as a strong-armed sales tactic.
Asking the Right Questions
If you are a buyer preparing to meet a business owner for the first time, you’ll want to make sure any questions you ask are appropriate and logical. It is important for buyers to place themselves in the shoes of the other party.
Buyers also shouldn’t show up to the buyer-seller meeting without having done their homework. So be sure to do a little planning ahead so that you are ready to go with good questions that show you understand the business.
Building a Positive Relationship
Buyers should, of course, plan to be polite and respectful. They should also be prepared to avoid discussing politics and religion, which often can be flashpoints for confrontation. When sellers don’t like prospective buyers, then the odds are good that they will also not place trust in them.
For most sellers, their business is a legacy. It quite often represents years, or even decades, of hard work. Needless to say, sellers value their businesses. Many will feel as though it reflects them personally, at least in some fashion. Buyers should keep these facts in mind when dealing with sellers. A failure to follow these guidelines could lead to ill will between buyers and sellers and negatively impact the chances of success.
Sellers Should Be Truthful
Sellers also have a significant role in the process. While it is true that sellers are trying to sell their business, they don’t want to come across as a salesperson. Instead, sellers should try to be as real and honest as possible.
Every business has some level of competition. With this in mind, sellers should not pretend that there is zero competition. A savvy buyer will be more than a little skeptical.
The key to a successful outcome is for business brokers and M&A Advisors to work with their buyers and sellers well in advance and make sure that they understand what is expected and how best to approach the buyer-seller meeting. With the right preparation, the odds of success will skyrocket.
Copyright: Business Brokerage Press, Inc.
The post Essential Meeting Tips for Buyers & Sellers appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
