Tuesday, 1 October 2013

Business Buyers and Sellers

A business buyer's task can be stated simply:  to buy a good company at a good price.

Buyers usually have many alternatives, and time is often on their side.

The job of the buyer is to make sure that a company is "as good as it looks" by analyzing financial statements and the competitive landscape of the industry.

The buyer should also question whether a company can successfully navigate a change in ownership, as companies sometimes lose key employees or customers in time of transition.

A business seller's task can be stated simply as well:  to position his company to receive the best possible price in the marketplace.

Sellers need to anticipate the sale of their company well before it actually happens so that they have enough time to sell unused assets or make other necessary changes.

Early consideration of important issues will allow sellers to capitalize on favourable conditions in their industry or in the capital markets.

Both buyers and sellers need to think carefully about the extent to which a company has created an economic moat - a sustainable competitive advantage -within its industry.  Business with wide moats tend to be more valuable.

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