Buying a business?

Summary

Most entrepreneurs buy a business through their private corporate entity. However, entrepreneurs who plan to buy more than one business should evaluate the opportunity to complete a direct listing and then make acquisitions as a public company.

Buying a business with no-money down?

There are many courses, books, consultants and other resources to help entrepreneurs buy a business. Several well-known 'gurus' offer training that costs tens of thousands of dollars, suggesting that entrepreneurs can acquire profitable companies with no money of their own.

It is possible to buy a business with OPM (other peoples' money). However, success is predicated on combining seller financing, bank debt and private party financing. Buying a business with no money down is a great goal that is often very difficult to execute in practice.

Countless prospective deals and untold hours of effort are lost because the buyer can't make the various financing components equal the amount necessary to close their transaction.

Why is it better to make acquisitions as a public company?

Entrepreneurs who pursue acquisition opportunities through a publicly listed entity have several significant advantages.

1. It is easier to find good acquisition candidates.

Good opportunities are hard to find, unlikely to appear on a business brokers website and are probably not going to land on your doorstep. Any growth minded entrepreneur understands they've got to relentlessly pursue their goals with passion in order to have any chance of success. Finding great acquisition opportunities is no different.

As a private individual or company, you're reaching out to sellers and/or brokers who don't know much about you, your experience or financial wherewithal. Despite your good looks, charm and sense of humor, there's no real way for them to prioritize your inquiry from all the others trying to find a great business to buy.

The trust, credibility, transparency and disclosures of a publicly traded company can help open more doors and keep them open longer for you to determine whether there's a transaction opportunity.

2. It is easier to close transactions.

Often, the difference between a successful close and waste of time comes down to whether the entrepreneur can combine enough financing to make all the ends meet.

As a business seller, would you rather hold a note for a private guy with private entity, or for a publicly listed company that is obligated to provide quarterly financial statements, an annual audit and the transparency and disclosures required by the Securities and Exchange Commission?

As a prospective creditor or equity investor, would you rather contribute capital to enable a private gal with a private entity to acquire a private business, or would you be more interested in providing capital to a publicly traded company?

Public companies can often negotiate better seller financing and have access to more debt and equity financing. In addition, sellers are often willing to accept stock as partial payment for their business, which provides them with additional upside while reducing the cash needed for an entrepreneur to close the deal.

3. It is easier to increase revenue and earnings post-closing.

The current and future operations of a company can often be grown faster, easier and at lower cost when publicly traded because public stock, options and warrants can be effective tools to cultivate opportunities and relationships that drive revenue and profit.

4. It is easier to increase shareholder value after an acquisition.

Public companies are often double or triple the valuation of equivalent size private companies. This is largely due to the more frequent communication, business disclosures, transparency and better liquidity afforded to their investors.

When buying more than one business, there's often opportunity to use stock, at higher public company valuations, to raise capital to make financing ends meet or acquire companies for cash.  There's no better way to execute an acquisition strategy than through a publicly traded entity.

Can you help us go public to make acquisitions?

We help entrepreneurs develop a go-public strategy, tap into our network to build the professional team, and manage the process to facilitate a direct listing, reverse merger or initial public offering. Our services help entrepreneurs take their company public so they can recruit talent, raise capital, complete acquisitions, and create significant wealth. Connect with us to learn more.

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