Buying selling firms is what we do, but some people think they can pull the wool over our eyes.Jonathan Fagan, MD Jonathan Fagan Business Brokers Limited
Buying and selling firms is what we do all the time, and about 25% of potential buyers approach us and give us a reason as to why they are looking to purchase a firm which is invariably made up. Or they try to buy the firm without us noticing.
Keeping your powder dry
Sometimes I guess it is perfectly acceptable not to reveal your private financial circumstances and the reasons that you need to purchase a firm at a particular point in your career, but we get so many of these I thought it might be worth just dropping a quick article onto the site to say that if you are looking to purchase a firm, please whenever possible try to be honest with the business broker (i.e. us).
For example, if you are a firm looking to purchase another firm because your professional indemnity insurance has just rocketed and you are in dire need of a new business to invest in and carry on with, it is probably not a good idea to tell us that you are looking to expand your business by acquiring a new firm.
It would be much better to tell us that you are looking to take over another practice and you need to do this within the next 90 days because your business is about to go belly-up. You can ask your broker to keep this information in strict confidence, because of course it may or may not be an issue to the seller, who may similarly want a quick disposal of the practice, but it certainly helps give us an idea as to what it is you are looking for exactly, and we can make the right connections. There is a world of difference between firms simply looking around to see what else is up for sale and firms who are in urgent need of a purchase because of specific circumstances relating to them.
You cannot go into buying a business without getting into specifics, and it will come out sooner or later as to what’s going on. The danger of not telling everybody from the outset as to why you need to purchase a firm is that at some point it’s almost always going to come out in the wash, and sellers get very, very nervous if there’s anything untoward about a buyer coming through that makes them concerned that they are getting caught up in something that isn’t going to be above board. If you explain from the outset exactly what it is you are looking for and how you intend to do things, then it helps move the whole deal forward quickly and creates trust between you and the seller and us, the broker.
Registering as a buyer but not revealing reasons
A quick example of why we need to know these things came up yesterday. A partner of a firm got in touch to say he was interested in purchasing a practice, went through the motions of explaining that it was due to expansion, looking to acquire other firms, and made a specific enquiry about one of the firms that was on our list.
We went through the process of registering him as a buyer, completing an NDA, getting terms agreed and finding out a bit more about him, and got consent from the seller of the firm in question to release details to this buyer so that he could have a look at them. At this point the potential buyer started making very specific enquiries that set an alarm bell off in I think the seller’s mind and my mind, as he started to ask about membership of specific lenders panels (for conveyancing) – this was a legal practice. The alarm bell was that of course the reason this buyer was looking to purchase a practice, and this specific practice was probably almost certainly because of the need to be able to work with that particular lenders panel, and quite possibly because they’d got issues with their current professional indemnity insurance, and if not that then they were in need to getting on to the specific lenders panel, hence the purchase of the practice.
The buyer had not told me this at the outset, and if they had it would have made life a heck of a lot easier, as we could have simply provided him with the identity of any firms we had on our lists who were actually on that panel. Furthermore we suspect that particular buyer will have a very strict deadline for purchasing a practice, hence his somewhat pushy approach to getting details of this specific firm. If he had told us this at the outset then we would have moved things along for him, and also again pointed him in the right direction for the firms that he needed to be considering.
So in summary to the title of this article, yes of course you can pull the wool over the broker’s eyes, but that’s not really going to help you in most circumstances, and particularly not with our company. We don’t charge anybody fees unless a deal occurs, so we get nothing out of any deals unless they go ahead, and then it is the buyer who pays us. So essentially we act for the buyers by working as their representatives effectively. Failure to tell us everything doesn’t really help us serve them when it comes to acquiring practices. And trying to buy a business without telling us? Oh please, we do this for a living and we will find out.. Don’t waste your time! Jonathan Fagan Business Brokers Limited.
Jonathan Fagan is MD of Ten-Percent.co.uk Limited and TP Recruitment Limited, a set of websites involved in a range of recruitment work. Jonathan has been running small businesses for over 20 years and has a number of interests and investments in companies as diverse as transcription, legal recruitment and a bit of marketing. He is an author of a number of guides and books, together with a children’s novel. In his spare time he enjoys playing golf, cricket, coaching girls’ football, operating a parent taxi, lots of running and paddleboarding on Bala Lake and the River Dee. He is a strong believer in a good work-life balance and regular blogs on making money vs enjoying life. Jonathan’s website is https://www.jonathanfagan.co.uk