Buying a business can be a fast track to growth and profitability for individual buyers, private equity sponsors, and acquisitive companies. However, if proper due diligence is ignored, what looks like a solid deal can quickly turn into a risky venture or worse, an unprofitable endeavor.

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According to industry statistics, only 1 in 15 prospective small business buyers ever completes a transaction. Reasons range from the business not being ready to be put on the market, or worse there are so many problems with the business that no one wants to buy it. However, the main reason is the buyer or acquirer may be looking at a business that is not suitable for matching the skillsets, or there are a host of integration dynamics and challenges the opportunity presents.

 

Buying, or acquiring, a business brings enormous potential upside when executed right, and horrific downside when wrong. To mitigate the risk, it is imperative that a buyer be armed with flawless due diligence, an accurate valuation, the right questions for the seller, knowledge of what research to do, effective capital structure understanding, and flawless integration strategies.