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This article explains how to take over businesses and properties using leverage buyout or no cash down principles. Only about 17 percent of businesses for sale are sold annually. Using leverage buyout, it is possible to help a desperate seller out of businesses that they can no longer run due to age, ill health, bereavement, or many other reasons. If you are a seller, learn how to sell your business using these principles.
Edit Steps
- 1Gain your funding source from the seller. This is basically using "free money" or OPM ("other people's money") loaned to you from the seller seeking to dispose of the business. This allows you to pay no interest usually and no money raising fees are levied. When this money is used in the acquisition of the business rarely is proof of credit worthiness ever asked for.
- 2Create a sense of confidence for the seller. You will need to build the seller's confidence for this to work. Dress well in quality clothing (business suit is ideal) and be conservative in your appearance (wear understated accessories). Be poised, confident and polite.
- 3Draw up a financial plan for the acquisition. This is known as “The Pyramids”. This is because the leverage buyout practitioner's structure means that the first thing you do is lock in the large amount first and probably the last amount would be the petty cash. Hence the pyramid shape of the final transaction.
- Within this pyramid, many of the amounts will be included as interest-free loans from the seller. What has to be borne in mind is the fact that an LBO transaction using Other People's Money or “Free Money” results from the fact that the seller often has the desperate need to sell due to bereavement, serious health problems plus many other reasons covered in the manual. Often by the time you as a leverage buy out practitioner meets the seller, he has been trying to offload his business for up to five or more years.
- 4Understand the benefits that you bring about with an LBO deal. Essentially, you are:
- relieving the seller of a business that he can no longer cope with
- saving the business and all the jobs and it
- enabling the business to pay creditors
- enriching yourself in order that you can help another distressed business.
- The fact that the seller authorises the use of his money in this matter demonstrates his absolute need to sell under any circumstances.
Edit Tips
- Leverage buyout happens in both the small, large and mega industries. Rover was a prime example where for a £1 a transaction was confirmed that in actual fact included huge land assets, acres of machinery, stocks of spares and completed vehicles plus a pension fund worth many millions.
- Leverage Buyout can be used in almost any circumstances including business, Property, aircraft, ship or almost any medium to large purchase where the seller is willing to participate.
Article Info
Last edited:
February 26, 2012 by Maluniu
Categories:
Stub | Finance and Business
Recent edits by: Flickety, Krystle, Carolyn Barratt (see all)
