Businesses are frequently bought and sold. Entrepreneurs and business owners often weigh up the cost benefits of acquiring an existing business against building one from the ground up. Business acquisitions usually take place when someone wants to enter a new industry or when an existing business owner spots an opportunity to expand their existing business by offering new products or services.
In order to facilitate any business acquisition, the acquiring party will need either to source the capital with which to purchase the business or come to another arrangement, such as an earn-in. Obtaining finance for an acquisition can often be a difficult process depending on the circumstances.
Here at rebuildingsociety.com, we’ve tried to make the process of raising acquisition finance efficient and cost-effective. We have also worked hard to try and ensure that the finance will set the business up for the best possible start to their new chapter.
We’ve funded a variety of business acquisitions all over the UK, across many sectors, all with different reasons for selling and buying. Here we look at some of the successful acquisitions our lenders have supported over the years:
Dorset-Based Pet Store
The existing owner wished to retire. The purchaser, who was a regular patron of the store, was seeking a new business opportunity following previous business management and retail experience.
Finance Amount: Circa £134,000 over 5 years
Finance Structure: Secured term loan at 17.75% supported by £25,000 contribution from the purchaser.
Success Factor: The purchaser’s personal financial contribution to facilitate the acquisition combined with the tangible security offered and the experience of the incoming directors made this a successful fundraise.
The seller agreed to stay on in the business part-time to ensure a smooth and successful transition.
Birmingham Nursery School
Experienced health care and nursery school teachers were seeking new business and employment opportunity.
Finance Amount: £120,000 over 5 years
Finance Structure: Secured term loan supported by personal contribution of £50,000 bypurchasers. £150K payable at the point of acquisition with a deferred consideration of a further £35K payable two years after acquisition. Acquisition acquired the goodwill and lease of the current trading business, with a new lease of 20 years.
Success Factor: The directors financial contribution to support the sale and their previous experience and qualifications along with the security on offer, helped this loan reach its fundraising target and allowed for a successful acquisition.
Accountancy Practice in Kent
The purchaser wished to expand an existing successful accountancy practice through the acquisition of a competing accountancy firm.
Finance Amount: £110,000 over 5 years
Finance Structure: Unsecured term loan at 11.79% to purchase trade and assets of the existing local accountancy firm.
Success Factor: The director’s track record of running an already successful accountancy firm.
Making SME Acquisitions Easier
The above are just three examples of the acquisitions that have been facilitated through finance raised on our platform. Common to all three was the experience of each of the directors behind the acquisition. This is crucial when it comes to lenders considering whether to support a loan. In addition, lenders are also more supportive of loans where the directors acquiring a business also support the purchase with personal funds. This gives lenders the confidence in the incoming directors and assurance about their commitment to the success of the acquisition.
Our ability as a platform to carefully consider each loan application that comes our way and to review the merits of each business has made us a go-to platform for many commercial finance brokers looking for lenders to assist their clients. Geoff Cooney, Commercial Finance Broker at Genie Lending, has frequently used rebuildingsociety.com for business acquisitions.
To further facilitate business acquisitions, we have also developed a method to more efficiently complete an acquisition. Purchasers can carry out a successful acquisition whilst also ensuring that they take advantage of their ISA tax allowances when contributing towards the purchase price. Furthermore, sellers who do not need or necessarily want the full asking price for the business can also choose to defer receipt of the income and receive this as monthly repayments from the business, once again allowing them to structure their finances in a tax efficient manner.
