Buying A 'Rival' Business?

missile

I just dont want to see their business go under or struggle as it seems to be doing

I can't understand your motive for buying their business, but have you considered they could simply start again under another name?

Tea3

We sell the same kind of items but have different target audience due to the way we market our products. I would not dream of trying to pinch their customers so it would be good to own both businesses as we are the only two companies selling these items. To set up what they have done to attract customers would take us ages (and take them ages again and the name is their pull anyway). They have the idea there just dont seem to have the funds or time to push business (they are students so time and funds are split just now). I always rescue the abandoned dog rather than go for the cute puppy option (which is why I have a house full of bitsa dogs lol) and I think I am the same with business - we can expand ours or create new outlets tapping into their market but I would rather buy their business or invest in it as then we all win - would hate if a business was struggling due to my actions (yes I know its called business for a reason but I am a little too soft-hearted to chase other audience while someone else relies on it for income). After Xmas I will contact them I think - if they say no then nothing lost - if they say yes then we all win

missile

My point is, if they don't share your "ethical approach" to business, you will have provided them the funds to start up again and develop their business.

Bamber19

You'd be wanting to include a restrictive covenant in the contract of sale in order to bar them from setting up another rival company for a set period of time.

vivatifosi

Hi Tea 3

I tried to post a reply when the system went down (I hope it wasn't my fault :eek:), but it got lost, so hopefully I've captured the gist of things here....

I do research for an M&A firm on an occasional basis, but I'm not an M&A consultant so please don't construe what I say as professional advice. Indeed, if you want to go further on this I would suggest getting professional advice before making contact.

I would want to find out everything I can about this firm before contacting them. In particular, I'd be very wary of basing any offer on their turnover as you could end up paying wildly over the odds. This doesn't sound like a big purchase, but I would speak to your bank and/or your business's solicitor who should be able to advise you on such a deal.

I'd want to get as much info as possible about the company. If they are a Limited Company, I'd start by buying a copy of their accounts and annual return from Companies House (£1 each I think). As they are likely to file abbreviated accounts, it may also be useful to see their FAME report. FAME is an online database which is often available at major libraries. If you don't have one near you, the British Library business reference section, or the City Business Library in London may be able to access this for a small fee. FAME gives you a QUI score, which, if the algorithms work correctly (and for the companies I've watched they have been pretty accurate), work out the financial health of the company: ie the closer the score to 100 the better they are likely to fare, and the closer to 0 the closer they are to financial armageddon. You can also check accounts against previous years on FAME. What direction are the key numbers heading in?

In addition to financials, I'd want to mystery shop them and make sure they live up to the hype, as well as checking if they've been in the press and on any consumer review website such as this and/or others.

If they are students, and not financially sound, then they may find it difficult to extend their lines of credit (given the current state of money lending) and you may be approaching them at just the right time. However, firms when contacted can see £££ signs, and use your approach to tout themselves around elsewhere, so be careful. This is where an intermediary can be helpful as they don't know who's approached them, and therefore who to approach, though this does have to come out sooner rather than later.

In terms of contacting the firm I'd try and identify which of the students (if any) is the main shareholder as they should be the one you make your opening pitch to. It is not uncommon practice to write to these people at their home address (as per their annual return). If they have offices and employees it can be problematic to write in as even if you mark a letter confidential anyone in practice could open it. Therefore news of your offer spreads to people you may not want it to go to and they may get cold feet thinking they are going to lose key people.

I've telephoned the MPS before about this and been told that because you are looking to buy rather than to sell, home addresses aren't covered by any legislation in terms of who you can and cannot write to.

I hope these points are useful. Good luck in whatever you decide to do.

Tea3

Thank you so much for taking the time to write such a good and precise reply.
I've printed it off and when after xmas when i may make a move on this i'll go through it again.
Cheers