You have decided to buy a Business in Florida?
Here are the different steps to follow, to be successful:
Step 1 : The Research Criteria
This first step is very important, as it will impact the whole process. The objective is to share together on your project and on the elements that are important to you: location, sector of activity, purchasing budget, size of company, business model, number of employees, presence of managers, need for licenses and permits, desire to work full time or not in the business, on the operational aspects or rather on the administrative tasks, etc …
Depending on your need for a visa or not, the criteria may also vary (current profits, number of employees, etc.).
Step 2 : The Research
When the criteria have been well defined, I carry out research on the market and send you within a few days the first business listings that can correspond to your requirements. At this stage, usually, the name and address of the business are not disclosed. To access the information, it is necessary to sign an NDA (Non Disclosure Agreement). The confidentiality aspect is extremely important in the case of business transactions (the opposite of the residential real estate market where a seller wants everyone to know that his property is for sale or rent). In general, the valuation of the business is calculated according to the activity and the profits of the business (often in the form of a multiple of the cash flow). If customers or employees learn that the business is for sale, this can have a direct and very rapid negative impact on the activity, and therefore on the cash flow generated, and as a direct consequence, on the valuation of the asset.
Step 3 : The Analysis
Once one or more businesses are selected, we can organize a showing of the location or a formal appointment with the seller, both to visit the place and to understand the activity, the organization, the financials, the opportunities for improvement and growth, etc. At this stage, I also try to recover a maximum of complementary elements (detailed profit & loss, lease, list of equipment, employees, wages, licenses, etc.). My experience in the corporate world and on the transaction market in Florida allows me to accompany you more deeply in this stage of business analysis to assess the growth potential and the risks associated with such a purchase.
Step 4 : The Offer
If the business corresponds well to the requirements, the next step is to make an offer. The offer is never on the company or the corporation, but only on the assets of the company. Therefore, the contract signed is called an Asset Purchase Contract.
This is very important, as it avoids the risk of “buying” debts or any other legal issue that could affect the company behind the business.
The purchase contract signature implies a deposit made by the buyer, and placed on an escrow account, in order to guarantee the seriousness of the offer. The deposit amount is usually between 5 and 10% of the purchase price . The contract, nevertheless, provides for a number of « exit doors » for the buyer, which are here to secure him and allow him to withdraw from the process, before the finalization of the transaction (called the closing).
Step 5 : Between the Offer and the Closing
Once the offer is accepted and the deposit paid, a period of approximately 1 month occurs before the finalization of the transaction, the closing. During this period, two important procedures are engaged, that will help the buyer decide whether he wishes to pursue to the closing or rather terminate the transaction and recover his deposit.
The first procedure is called the due diligence. During this period of around two weeks, a more accurate assessment of the financial and / or legal aspects of the business is performed. Usually, a CPA (Certified Public Accountant), checks the financial documents received, especially to verify that there are no mistakes or hidden anomalies. A lawyer may have to check the licenses, or the existence of ongoing legal issues that could subsequently have an impact on the business activity (even if, as already explained, the buyer does not purchase the company, only the assets). At the end of this period of due diligence, the buyer is completely free to decide – without even having to justify himself – if he wishes to terminate the transaction. In that case, he will immediately recover his deposit.
The second approach follows the due diligence and consists in organizing the transfer (assumption) or renegotiation of the lease with the landlord (in most cases the business is purchased without the real-estate). The ideal option is usually to simply transfer the existing lease, in order to take advantage of the conditions already negotiated by the previous tenant. Sometimes, however, it may be wiser to renegotiate the lease (for instance to obtain a longer term). In all cases, the finalization of the purchase contract is subject to the agreement between the landlord and the potential buyer of the business. If no agreement is reached, then, the contract is canceled and the deposit paid back to the buyer. My experience shows that a landlord usually has a strong interest in transferring the lease, as it will guarantee him the continuity of his income.
Step 6 : The Closing
If all the previous steps have been successful, the closing is organized by a business lawyer (the cost is usually shared between the two parties). Several legal closing documents are prepared and signed, either in the presence of the seller and the buyer, or sometime remotely. The funds are paid both to the seller and to any third party involved in the transaction (lawyer, business brokers, etc.). Everything is done in total transparency between all parties.
In some cases, and if the seller accepts it, a suspensive clause related to the obtention of the E2 visa can be added to the contract. In this case, the closing takes place as described above, but the difference is that the buyer deposits all the funds in the escrow account of the closing agent (the business lawyer). The funds will then only be released and sent to the seller upon obtaining the visa. If the visa is denied, then the transaction is cancelled and the funds paid back to the buyer.
Step 7 : After the Closing
Once the “final” closing has been completed, the transaction is finalized, and everything really begins for the buyer. Usually, a period of 2 to 3 weeks is planned in the contract for the training and the transition between the seller and the buyer. This period allows the buyer to become familiar with the staff, the activity, the suppliers, etc.
It is also a very important period to carry out, with the seller, the transfers of licenses and any other official forms or documents (such as the certificate of use for instance).
Of course, I accompany you and advise you at every step of this process. I can also provide you with al list of professionals involved in the business transaction: business lawyer, accountant, immigration attorney, General Contractor (for work on site), licensing specialist ( particularly for alcohol licenses), etc.