Buy and Sell Business can be termed as a consolidation of companies. Mergers can be defined as a combination of two companies to form one company, while Acquisitions can be defined as when a company is taken over by another company. Buy and Sell Business in India is one of the major transactional tools of the corporate finance world. The rationale behind the Buy and Sell agreement is that two separate companies together may create more synergetic value in comparison to when each of these company’s operating alone.
Buy and Sell Business can take place:
- by asset purchase
- by share purchase
- by share swap
- by asset swap
Reasons for Buy and Sell Business Advisory
- Financial synergy such as lower cost of capital
- Improving performance by accelerating growth
- Economies of scale
- Diversification for products and services
- Access to new markets
- To increase market share
- Strategic realignment and technological up-gradation
- Tax efficiency
- Diversification of risk
How ASC can help in stepwise Buy and Sell Business Advisory?
- Project Assessment and Strategy briefing: ASC will need to understand the sell/divestment/acquisition/merger criteria, including product offerings /capabilities, quality of human capital, business size, and other must-haves of an ideal target company, through a strategy briefing session with your management team. Knowledge thus gained would serve to define an extremely detailed and focused search profile of the target.
- Research: Based on the briefing session, an in-depth economic, organizational, and market-specific scrutiny will be carried out to draw up a list of potential targets (“Target List”) fitting the sell/acquisition/divestment criteria set by the client. The initial long list of target companies will be discussed with you to screen the best and most suitable possible targets. (A shortlist of target companies would be generated as a result of such discussions).
- Solicitation and Pursuit: Specific approach will be made to each of the shortlisted targets at top management levels to see if they are willing to discuss and negotiate the broad parameters of a possible value-chain partnership. The identity of the client will not be disclosed to any short-listed target unless they have shown a willingness to discuss and have signed confidentiality agreements with ASC. Mutual presentations and any other relevant information will be shared at this stage, but carefully balancing the interests and intentions of the client.
- Target List: ASC will prepare an Ideal target profile, which will carry weights and or any other grades against each shortlisted target for the client’s management to pick up the final target(s). ASC will arrange for a visit by the client’s operational team to the selected target companies or vice-versa and arrange management presentations from the target companies to select the ideal target, subject of course, to the operational, financial, and legal due diligence.
- Due diligence and valuation: If requested ASC will conduct the valuation and facilitate/participate in financial/operational and legal due diligence, once a non-binding Letter of Interest has been exchanged between the target and the client.
- Negotiations: ASC will also prepare, facilitate and participate in the negotiations between the client and the target company until an agreement in principle has been reached (e.g. Letter of Intent / Term-Sheet) / and until the final signature of the acquisition agreement or equivalent thru the closing of the transaction.
Frequently Asked Questions
What’s the benefit of buying businesses over growing or creating businesses?
Buying a business saves you a lot of effort that goes into growing or creating your own business. When you create your own business, you have to start everything from scratch. This includes building a team, acquiring customers and market share etc. But when you buy business in India, you get an already established business with customers, team, market share etc.
What are the things to keep in mind before you buy business in India?
Before you buy business in India, you need to conduct a thorough research and due diligence. You need to ensure that you do not violate any law by acquiring an already established business like competition law or any sectoral regulations. Further, you need to determine the gains that you can reap immediately and in the future after buying a business.
How to determine whether a business is worth to be purchased?
To determine whether a business is worth to be purchased or not, you need to look into several factors. This includes determining the value of the business, purchase consideration, future growth potential, existing suits and obligations etc. You should consult a professional before you make any business purchase decision.
How can we buy and sell businesses?
You can buy and sell businesses through any of the four methods:
- Asset Purchase
- Share Purchase
- Share Swap
- Asset Swap
Are there any tax implications if we buy and sell businesses in India?
Yes. Buy and sell business transactions can involve tax implications. The amount of tax applicable and the provisions thereof can vary on case-to-case basis depending upon the way the transaction is executed. Hiring a professional will allow you to know all the financial, legal and tax implications and help you make informed decisions.
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