Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

October 16, 2020

How to Best Acquire a Business

By Jeremy Albelda


Buying an existing business starts with choosing the right type of business. As a first step, the investor should choose an industry he/she is familiar with and which best matches existing skills and prior experience.  This will shorten the learning curve after taking over from the previous owner. Next, the investor should consider the size of business in terms of revenue, employees and number of locations. Last but not least, the investor needs to decide on the geographical area in which to look for a potential business.

Most investors start searching for a business online. There are multiple buy-side websites available where an investor can search by industry, location and size of available businesses for sale.

Contacting a Business Broker or M&A Advisor is another way to search for a business. There are different Buy-side agreements Brokers are offering. Most Brokers are simply scanning buy-side websites for available businesses for sale, then offering support in the negotiation process and some due diligence. They then get paid a success fee upon closing a transaction.

To find a business that has not yet been brought to the market, the investor should search for a Broker who offers an exclusive investment search program based on agreed upon target criteria. Once the Advisor has identified a potential target, a comprehensive investment package consisting of a Confidential Memorandum and a 3rd party independent business valuation will be put in place and, after NDA signed off, sent to the investor for review. Such an agreement will carry a small upfront charge in addition to a success fee at closing, but has the advantage for the investor to have the exclusive right to review a business within the defined target criteria, without other buyers bidding on the business at the same time.

Whether the investor decides to hire an advisor or search by him/herself, it is imperative to have the right acquisition team (banker, accountant and transaction attorney) to support the investor in this process.

Once an investor has identified a potential target, multiple steps have to be taken:

The sell-side broker will request a Non-Disclosure Agreement to be signed and the investor should expect to also be asked to send in some background and financial information to ensure only pre-qualified buyers get access to the confidential information and a deal can be completed. Also a big plus is if the broker includes a 3rd party accredited business valuation in the Investment Package. Not only is the investor getting detailed information how the asking price has been established, but also an accredited valuation is also necessary to obtain bank financing.

Once the investor has reviewed the Investment Package, he/she will consult with their CPA to perform a value determination, a local industry comparison as well as confirm the asking price and terms with personal investment objectives. The outcome of this review should be a list of questions not addressed in the Investment Package.

If there is continued interest in the business, the advisor will set up a buyer/seller introduction to discuss the operation and answer the investor’s questions. Usually the buyer should expect – after a brief introduction – to outline his/her background and experience and to explain why this business is of interest.  Not only is the seller interested to find a buyer who can successfully continue to grow the business, the seller would be very reluctant to offer a seller note if there is concern that such note won’t be paid back. Due to Covid-19, first meetings are often held virtually which – besides reducing personal contact – has the advantage of avoiding employee involvement and ensure confidentiality.

Assuming the introduction went well and the investor wants to move forward with the acquisition, the next step will be the preparation of an offer. A typical Offer to Purchase includes action items and timelines, outlines specific deal terms and price, and includes an escrow check – usually 3%-5% of the asking price. Sellers prefer an Offer to Purchase versus a non-binding Letter of Intent as it identifies serious buyers by putting cash on the table. In addition, the advantage of an Offer to Purchase for both parties is that the framework has been defined and therefore legal costs will be considerably less as the attorneys are only asked to develop a definite agreement and not to negotiate the deal.

Here are important components of a deal structure:

  • Down Payment (for SBA financing a minimum of 10% equity is required which can be

split into 5% down-payment from the investor and 5% seller note)

  • Bank Financing
  • Seller Note (often required to be secured by non business assets)
  • Long Term Debt Assumption
  • Contingency Payments/Earn Out

Once the offer has been negotiated and accepted by both parties, the due diligence phase begins. Usually, the investor will create a list of due diligence questions and send the list to the seller. Such list will include the request for financial data like tax returns, balance sheet, P&L, inventory, accounts receivables, and payables. The investor might also request detailed customer and employee information, equipment /asset listing and lease information.

The investors’ acquisition team will be essential during the due diligence process – reviewing and verifying the data and confirming the information provided in the Confidential Memorandum and 3rd party valuation which is the baseline for the agreed upon Purchase Price.

Most of the time, the investor will need to obtain some form of financing, regulatory approvals and if applicable, seek license transfers. In order to shorten the process, it is recommended for an investor to seek out potential funding sources before starting with the acquisition search.

After the due diligence phase has been completed and the Asset Purchase Agreement has been agreed by both attorneys, buyer and seller will meet with their attorneys and the bank to transfer the business. The final purchase price will be adjusted on the day of closing based on the actual amounts of inventory, account receivables and account payables.

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or

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Client Testimonials

“ I appreciate your diligent approach to screening buyers and sellers as well as the high quality CIM that you produce.”

Andrey O, Investor

“Finally enjoying retirement after recently selling my business using the services of A Neumann & Associates. Joe Oddo provided the conduit to a successful transaction. Joe knew when to inject input and when to simply listen and allow the buyers to vent, step back and regroup. The outcome met our expectations and got us to the finish line, which included my staying with the company six months in order for the buyers to get their footing and keep our workforce in the loop. He helped at every step by providing his expert guidance & resources. Thank you!”

Emily Parker Myers, Co-Owner - Myers McRae

“I had been in touch with Karin and Gary from A Neumann & Associates regarding some opportunities and was looking forward to meeting with them. Hence, when they organized a seminar in Princeton, NJ, I was quick to sign up. The seminar was very informative as the team walked the attendees through various scenarios and referenced real life buying/selling situations they had been through. The sessions by Gary, Karin and Achim were crisp and focused and brought clarity to potential seller and buyers. I strongly recommend the team and look forward to continue working with them.”

Gaurav Tyagi

“Thank you for your Event on "How to value, Sell, and Buy A Business for Maximum Profit" and the insight into ANA’s approach on what is involved in the Business Exit for sellers. Garys Hervieiou's "Business Valuation", Achim's "Deal structure" presentation and Karin’s "Preparing the Package" are real street knowledge shared. They answered attendees questions which makes it more interesting for learning from others. Great for small businesses like us. The presentations were totally worth our time and travel for the event to Princeton, NJ from Rockville MD. Ravi Bhutani, President, CIPS”

Ravi Bhutani

“Gary, this is to thank you for an excellent job done in selling our business. We could never have done it without your professional expertise, dedication and time put in without reservation to make it happen. We will gladly and highly recommend you to anybody in our position.  It was a pleasure to work with you.”

Pat Iammatteo, Owner

“Your vetting is simply outstanding, among the best I've seen from a broker.”

Eric H., Investor

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Marc, who explained the process in detail. After meeting with Marc in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using to sell my business for max value. Working with Marc at A Neumann & Associates was very easy and professional. I did not know all that was going to be involved in selling my business but they helped me through the process. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. I highly recommend this firm to anybody who wants to sell now or down the road. Marc not only knows his stuff, but actually is a real nice guy.”

Double Diamond

“Used A Neumann & Associates to sale my business. could not imagine having done it with out the patience and experience Gary provided. Thanks Gary,”

Dennis Frazier

“Working with Marc and his company was a pleasure. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi
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If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

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