Buying Instead of Founding: Acquiring a Business as a Path to Self-Employment (10 Expert Tips)

The process of buying a Company

Acquiring a company requires careful planning and preparation.

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• Defining Your Positioning: Before you begin searching, create a rough search profile that you can refine over time. Based on our experience, key factors include how generalist or specialized the company should be, whether it requires technical expertise, and how much staff management responsibility you are comfortable with. An M&A advisor, such as Venture Advisory Partners, can help define the ideal search profile for you.
• Building a Strong Deal Pipeline: Review at least 30 businesses before making a decision. You can often request teasers from seller advisors and, after signing a confidentiality agreement, receive full company presentations (exposés) for review. Businesses for sale can be found on platforms like the Deutsche Unternehmerbörse or the Sparkassen business marketplace.
• Off-Market Search: In addition to approaching businesses that are actively for sale, you can conduct an off-market search, targeting companies that may be open to a sale but are not publicly listed. For example, you can discreetly research businesses where owners are nearing retirement but have not yet found a successor. Since this method requires significant effort, Venture Advisory Partners assists clients in off-market searches.
• Due Diligence: This refers to the in-depth examination of a business before purchase. A checklist can be helpful to ensure that all crucial aspects are covered.
• Financing Options: You don’t necessarily need to fund the entire acquisition with your own capital. Various financing options are available, including mezzanine capital, government-backed loans, seller loans, and earn-out agreements. While a certain amount of equity is generally required, it is possible to acquire a profitable company with minimal personal investment.
• Taxes and Duties: A business acquisition involves tax considerations. It is advisable to get expert advice early and consider using a holding structure for tax optimization.
• Professional Advisory: Engaging an M&A advisor from the start, along with a lawyer specializing in business acquisitions, provides valuable support and helps avoid costly pitfalls.