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Henley Business Brokers

Henley Business Brokers are independent specialist business brokers and business transfer agents, working collaboratively with accountants, focused on owner managed companies in the Manufacturing, Engineering, Fabrication, Industrial, Distribution, IT and B2B Service sectors, with turnovers of between £0.5 million and £10 million. 

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How much money would my client need to buy a business?

23rd Sep 2020
Brought to you by
Henley Business Brokers

Henley Business Brokers are independent specialist business brokers and business transfer agents, working collaboratively with accountants, focused on owner managed companies in the Manufacturing, Engineering, Fabrication, Industrial, Distribution, IT and B2B Service sectors, with turnovers of between £0.5 million and £10 million. 

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Not as much as you think.

Many deals are structured with an upfront element and a deferred element.

The upfront element is usually funded by a loan against the company if there are fixed assets or a reliable debtor book. As the accountant you can help analyse the target company financials and plan the cash flow of the company going forward to ensure that any financing plan viable.

Some lenders will advance more funds if your client is willing to sign a personal guarantee but this depends on their approach towards risk, how keen they are to do the deal and whether they can afford to lose the collateral. It should not be automatically dismissed but an asset rich client with an unencumbered property portfolio may well be advised to leverage their asset and make it work harder for them.

How much cash is required upfront is often part of the negotiation process, which the broker will manage, as is the deferred element. The length of the deferred term is also subject to negotiation and could be as much as 5 years and may be determined by a variety of metrics such as turnover, profits or customer numbers.

Our advice for you to counsel clients is that they should not hold back from seeking acquisitions because they believe it to be unfundable.Once they embark on seeking a target they will almost certainly come across the right one that fits their requirements and doesn't drain their resources.

With their trusted business adviser by their side their business will be headed to the next level and they’ll wonder why they waited so long to make a move.