Home Business The Different Ways to Buy an Existing Business, Explained

The Different Ways to Buy an Existing Business, Explained

The Different Ways to Buy an Existing Business, Explained
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Do you dream of being a business owner? Do you love the idea of working for yourself and being your own boss?

But, at the same time, you realize just how hard it is to start a business from scratch. The idea of doing so doesn’t appeal to you, but you don’t know how to get to the point where you run your own business without first starting it yourself.

Well, in this article, we’re here to tell you exactly how to do that: buy an existing business. When you buy a business, you forego the uphill battle that is starting a company from scratch and can instead focus on growing a company. 

There are a couple of different ways you can buy a company, and we’ll explain them here.

Share Transactions

First and foremost, one of the best ways to buy an existing business is through a share transaction. A share transaction is a purchase in which you buy a majority stake in the company’s ownership.

If the company is public, you can make this purchase via the stock exchange that the company is listed on. However, the more of a company you purchase, the higher up its share price will go. Keep that in mind when doing the budgeting.

Within share transactions, there are two different methods. The first one is to notify the current owners of your intent and coming to an agreement on the purchase. The other method is a hostile takeover, wherein you make the share transaction against the current owner’s wishes by accumulating more stock than the current principal owners.

If you don’t have the capital to make this investment in a share transaction upfront, then you can consider borrowing money for it (this purchase is called a leveraged buyout).

Asset Deals

When learning how to buy an existing business, you should also learn about asset deals. Contrary to a share transaction, in an asset deal, you do not buy the legal entity of the business itself but rather purchase their assets.

Such assets could include intellectual property, manufacturing equipment, and the like.

For companies that produce goods, this can be a great buying strategy, particularly if you want to rebrand the product with your own style. However, if the value of the company is more in its existing contracts with clients and the relationships that it has built, then purchasing the assets of it won’t do much good for you.

How to Buy an Existing Business, Made Simple

There you have it. Equipped with this guide on how to buy an existing business, you should now have a far better idea of what method you will use to buy a company. If the brand name of the company is important, then a share transaction is the way to go. Otherwise, you could get by with an asset deal.

For more business advice, be sure to check out the rest of the articles available to read on the website before you leave!