Purchasing a business

This might seem a bit irrelevant to most but I will attempt to put my point across none the less.

We are trying to buy a business and there has been much back and forth.
I cannot mention the business name but I can say it is a Women's and children's shoe brand.

I cannot give you the exact figure so I will use a made up one:
We have offered 60k with almost half up front and the remainder over a period of months.
The owners of the business would like all 60k up front. I am certain not all the shareholders feel the same way and are happy with our offer but they are being ignored.
They have also requested that some shares be retained by the chairman and an employee, 5% each. This seems odd and should not be part of any deal.

I am also dubious of some of the employees - one seems to have been promoted to managing director although is only 2 years out of college, this is the same employee that requires 5% share retention. My instinct tells me that something isn't right and perhaps I should look further into the experience and level of expertise this employee maintains, I suspect I will find very limited value in this person and they may well turn out to be nothing more than a 'yes person' to owners.

The rest of the business has been badly run and huge mistakes have been made, but fundamentally there is a very profitable business underneath once senior management has been cleared out entirely. There is very limited experience among them and they are the reason the potential of this business has not been realized.

I would be delighted to hear your comments.

Comments

  • NeillawNeillaw New Member RossendalePosts: 242MAAT, AAT Licensed Accountant
    I take it from this post that you are trying to gain 100% shareholding, you don't mention if the contact owns a majority shareholding in the company or not.
    If someone was buying my business then I'd want the majority of the funds upfront and not half on drip.
    Your due diligence should take care of the directors capabilities and may include some background work on their social media (LinkedIn etc).
    From your information I would be guessing but I'd say the MD is a relative and they're looking to make sure they aren't discarded with the rest of the senior management.by making sure they have a minority shareholding.
    Again it would depend on how bad you want this business, is the business also being driven to the wall, then it may be a case of waiting to picking it up from the liquidators at a lower price. Is the shareholder desperate to sell the company?

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