IS THIS THE RIGHT TIME TO BUY A COMPETING BUSINESS?

A fellow member of the New York State Bar Association ‘s Business Law Section recently published an excellent article named “Is This the Right Time to Sell My Business?”[1] The article explores reasons, principally the emergence of the private equity market, why it might be the right time for some owners to sell.

On the other side of that coin, I propose that it might also be the right time for some business owners to buy another business…especially a direct competitor or a complementary business.

Covid 19 has left many businesses with shrinking revenues resulting from reduced customer spending. In some cases, the most efficient way to replace that lost revenue is through acquiring more customers.

This troubled economy may well give rise to acquisition opportunities that would not otherwise exist. For example, companies that were minimally profitable, just getting by or losing money may be available for sale…even if the owners are not actively trying to sell. This may often be the case where ownership is getting on in age and looking for an exit strategy.

Owners in “exit” mode are often willing to sell for very reasonable purchase price; paid on very reasonable terms. At today’s interest rates a bank loan may be an attractive option. Moreover, seller financing (i.e. where the Purchase Price paid over a period of years) is typically even more attractive. A seller will often accept a small down payment…with the balance to be paid over years. A Seller may also accept an “earn out” where the Purchase Price is determined, in whole or part, by the target company’s performance for the years following the acquisition…this can substantially reduce the buyer’s risk of overpaying.


[1]  See Vol. 24; No. 1; Summer 2020 Volume of the New York State Bar Association ‘s Business Law Journal; page 18; by Stuart B. Newman, Esq.