- Buy Side
Buying a Business: What You Are Really Acquiring
The name on the door is only the beginning. What you actually receive when you buy a business depends on what the seller actually owns, and whether it can transfer.
A business is a bundle of things
When you buy a business, you are not buying one thing. You are buying a collection: a trading entity, physical assets, contracts, customer relationships, supplier agreements, licences, permits, a lease, staff, intellectual property, and a reputation. Each of those items may be owned differently, registered differently, and subject to different rules about whether and how it can transfer to you.
What can go wrong
A seller may own the brand in one country and the trading company in another. Distribution rights may be held under a personal agreement that cannot be assigned. A licence to operate may be tied to the current owner and require fresh application. A lease may need landlord consent. A key contract may contain a change-of-control clause that lets the other party walk away. None of these are unusual, but any of them can derail a deal if discovered late.
The question to keep asking
At every stage of due diligence, the question is: does the seller actually own this, and can it actually pass to me? This sounds basic, but in practice it requires checking company registrations, intellectual property filings, licence conditions, contract terms, and sometimes the laws of more than one country. Do not assume that because a business has been trading under a name for twenty years, the seller owns that name in the jurisdiction where you plan to operate.
Assets versus shares, again
Whether you buy the assets of a business or the shares of the company that owns them changes what you inherit. A share purchase brings everything, including liabilities and history you may not want. An asset purchase lets you pick and choose, but it also means each asset must be individually transferred, and some may resist the move. The right structure depends on the deal, but understanding what is in the bundle, and what might fall out of it, is where every buyer should start.
Get local advice
Ownership, registration and transfer rules differ by country, and sometimes by province or sector within a country. A contract that transfers simply in one jurisdiction may require regulatory approval in another. Use local legal and accounting professionals who know the rules where the business operates. The cost of that advice is small next to the cost of buying something that turns out not to be yours.