Business Acquisition

InvestingBuying and selling companies is similar with the key difference is that in addition to the physical property the business model is restructured. This means one or more of the following: new marketing programs, a change in leadership, enhanced systems and controls.

Buying a business is different from buying real estate. When you buy a business you cannot just throw some paint on the building and the value increases. You must increase the amount of revenue and hold down or reduce expenses. Again unlike real estate with a business you cannot simply “raise the rent” or increase the price of a product (although that may be necessary). It is critical that you increase the number of products that are sold.

Selling more products also has some added benefits. First, it usually reduces the cost per unit and thus increases value. But second, it increase employee moral and thus productivity is also increased. Increased productivity also flows straight to the bottom line.

Typically businesses have a lot of “locked-in” value. We believe it is our responsibility to also unlock that value. The reason is that once that value is unlocked it opens up the capital to expand and sell more products and thus again increase the bottom line—net profits.