Common Questions in Buying or Selling a Busniess
- What is a Merger?
A merger occurs when one business for sale is combined with and disappears (or mergers) into another corporation. All mergers are statutory mergers, since all mergers occur as specific formal transactions in accordance with the laws, or statutes, of the states where the companies are incorporated. The post-transaction operations or control of a company has no relevance on whether a merger has occurred or not.
- What is an Acquisition?
An acquisition is the process wherein the stock or assets or a business for sale are acquired by a purchaser. The transaction may take the form of a stock purchase or an asset purchase.
- What is the difference between a Merger and an Acquisition?
An acquisition is the generic term used to describe a transfer of ownership of an acquired business for sale. Merger is a distinctive, technical term of a particular legal procedure occurring after an acquisition of the business for sale.
- What is a Leveraged Buyout?
A Leveraged Buyout (LBO) is a transaction whereby a company’s stock or assets are purchased largely with borrowed money, resulting in a new capital structure consisting of a high percentage of debt secured by the assets of the acquired business for sale entity.
- What is an Earnout?
An earnout is a method of compensating a seller based on the future earnings of a business for sale. It is the contingent portion of the purchase price. A common type of earnout provides for additional payments to a seller if the earnings exceed agreed-upon levels. Another type of earnout may provide that certain debt given to the seller as part of the acquisition price be paid out early if earnings exceed agreed-upon levels.
- What are the different forms of transactions?
There are three general types of transactions in the business for sale: Asset Purchase, Stock Purchase, and Merger.
- What is an Asset Transaction?
The business for sale transfers the assets of the business to the purchaser. These could include equipment, inventory and real estate, as well as intangible assets such as contract rights, leases, copyrights, patents, trademarks, etc. The business for sale executes the specific types of documents necessary to transfer the assets, such as deeds, bills of sale, and assignments. This type of transaction generally contains tax attributes favorable to the buyer.
- What is a Stock Transaction?
The seller transfers the shares in the acquired corporation to the purchaser in exchange for an agreed-upon payment. A Stock Transaction is appropriate when tax costs, risk considerations or other issues surrounding an asset transaction can make a Stock Sale more appealing to the parties.
- When is the best time to sell my business?
The best time to sell a business is when it's doing well. It’s best not to wait until after a business has peaked; the selling price will suffer. However, almost any business for sale can be sold, even if it is not doing well, if the business for sale is handled professionally and positioned correctly.
- How much is my business worth?
A company’s value depends on many factors such as cash flow, asset values, financial history, condition of equipment and premises, occupancy issues, competition, and the capital markets. By analyzing your business for sale and your industry, APEX Business Brokers can advise you on the proper pricing parameters and market strategy to sell your business.
- Why not sell my business myself?
Most owners find that the frustration, expense and time involved do not yield cost savings and many end up working with unqualified buyers. In fact, because they do not have access to a large number of qualified buyers, many owners end up selling a business for much less than they could have received by working with a well-established intermediary or business broker. Plus, owners find it difficult to work directly with buyers while maintaining confidentiality. Selling a business is a specialized trade. Seek professional assistance when it comes to selling an asset as valuable as your business.