Mergers & Acquisitions

Guide to Buying a Business

Meet or Talk with the Seller

You’ve reviewed the confidential information memorandum (CIM) and financial statements, and you are interested. Now what? The next step is to arrange a phone call or personal meeting with the seller or a site visit to see the business in person. We ask that you not contact any employees of the company in order to keep the pending sale confidential.

Asking Questions

Before meeting the seller, prepare a list of questions, but don’t email them unless you only have a few simple questions. Sellers tire of emails with repeated requests for more information and subjective questions that require detailed answers.

If you have a lot of questions about a particular business, we suggest a phone call or face-to-face meeting. This will make the seller feel comfortable that you are qualified and interested, and they are more likely to be upfront and helpful. This also saves the seller time because it’s easier to discuss questions on a phone call than exchange multiple emails.

Requesting Additional Documents

We suggest meeting with the seller before requesting additional documents. Some buyers arrange two to three additional meetings before making an offer on the business.

Let the Seller Know You are Qualified

The seller will release information about their business to you in stages, in a specific order, as you express your interest and provide documentation to confirm your financial and operational qualifications to purchase their business.

You can speed up this process considerably by providing the seller with the following documents early in the process: credit report, resume or C.V., bank statements, tax returns, and any other information that confirms your qualifications. If you confirm your ability to purchase, they will cooperate by disclosing more information earlier in the process.

Face-to-Face Meetings

After a brief introduction, we recommend that the seller immediately show you their business. At this point, you will likely be anxious to go on a tour, so don’t feel guilty if you don’t want to sit down and engage in small talk. The only thing on your mind may be seeing the business, so request that you do so before sitting down and talking.

Ask as many questions as you want. Share information about yourself, too. Keep in mind, though, that the seller may be concerned about confidentiality. Make them feel comfortable. Tell the seller additional details about your background and experience and why you think you may be a good fit for the business.
Don’t be afraid to ask basic questions. If you have not owned a business, be upfront with the seller regarding your lack of experience.

Topics to Avoid When Meeting the Seller

  • Asking to see tax returns and bank statements
  • Discussing financial aspects of the transaction (e.g., asking price) during the showing. Please contact us if you are interested in making an offer.
  • Asking the seller to disclose proprietary or trade secrets
  • Negotiating the purchase price
  • Discussing other terms of the transaction

Don’t become overwhelmed with too much information at first, and don’t overextend your stay. You can always come back for an additional meeting. But beware of possible diminishing returns: if you request a sixth or seventh meeting, the seller will assume you will never buy their business.

Limit the Number of Meetings

Remember that when buying a business, the seller makes certain representations regarding their income and other factors. These representations aren’t verified until you negotiate an offer and due diligence begins, so five or six meetings should not be necessary.

Save the in-depth investigation of the business for after the seller has accepted your offer. This time period of investigation is called due diligence. A few meetings should be enough for you to decide if you want to make an offer and move forward. If you can’t make up your mind after the fourth or fifth meeting, perhaps it’s time to move on. At some point, you must tackle your fears head-on and make the leap of faith. Additional information rarely alleviates your fears.

Does Morgan & Westfield accompany the seller to the meeting?

No. Sellers and buyers find the initial meetings are low-key and largely stress-free. These are “get to know each other” meetings. Having a third party, such as us, at these meetings often makes everyone nervous. We can, however, set up a conference call if you would like to discuss potential transaction structures, or we can talk one-on-one with you if you would like to discuss making an offer.

There is no magic formula, but the right number of meetings between the seller and a potential buyer is usually between one and four. Most sellers aren’t willing to set up too many meetings, feeling that if a buyer has not made an offer after a few meetings, they may not be serious about buying a business.