Business Acquisition

How to learn with this guide

1. Read each explanation, then repeat the worked example without looking.
2. Follow the three-step method aloud and answer the check.
3. For feedback and a reworded attempt, return to the interactive lesson.
4. At the end, explain how the idea applies to your own industry.

LESSON 1 OF 4

Define the acquisition thesis

Outcome: Set fit criteria before looking at asking prices.

Concise briefing

Buying a company can provide an operating base, but a good story is not a strategy. Define the customer, geography, your capabilities, seller dependence, budget, and required working capital. Reject deals outside the criteria before sunk costs drive the decision.

Worked example

A veteran operator seeks a local distributor with recurring retail orders and documented routes. A listing with strong sales but an expiring exclusive supplier contract fails a key criterion until renewal risk is understood.

Repeatable method

1. Write target industry and operating fit.
2. Set price and cash reserve limits.
3. Record nonnegotiable risk questions.

LESSON 2 OF 4

Separate assets and obligations

Outcome: Flag deal structure questions before assuming what transfers.

Concise briefing

A buyer may purchase selected assets or ownership interests; liabilities, contracts, tax consequences, employees, licenses, and consents differ by structure and jurisdiction. Do not assume an asset deal eliminates all exposure or that customer contracts transfer automatically.

Worked example

The proposed deal includes vans and inventory. One major retailer contract requires consent before assignment. The buyer lists that consent and inventory condition as closing questions for counsel.

Repeatable method

1. List assets and rights the buyer needs.
2. List liabilities and obligations that might follow.
3. Identify consents, licenses, and transfer restrictions.

LESSON 3 OF 4

Verify the numbers

Outcome: Reconcile claimed earnings to source records and cash needs.

Concise briefing

Ask for tax returns, statements, bank deposits, invoices, inventory and aging, payroll, and customer concentration. Reconcile periods and investigate adjustments. An asking price multiple is not proof of cash flow. Accountants and counsel should review material discrepancies.

Worked example

The seller says annual revenue is $1.2m. Bank deposits and sales ledger support only $1.05m before documented timing differences. The buyer asks for a reconciliation and does not price the unexplained $150k as earned revenue.

Repeatable method

1. Request dated source documents.
2. Tie sales to invoices and cash where possible.
3. Separate explained timing from unsupported differences.

LESSON 4 OF 4

Plan the first 90 days

Outcome: Budget transition cash and continuity tasks.

Concise briefing

Closing is a handoff, not a revenue guarantee. Model payroll, inventory replenishment, receivables timing, seller transition support, key staff retention, and customer introductions. Check the low cash point with a downside case.

Worked example

Purchase financing covers the price, but a retailer pays 60 days later. The buyer models two payroll cycles and a $35k restock before that receipt; the operating reserve must address that gap.

Repeatable method

1. List cash needs and due dates after closing.
2. Schedule customer, supplier, and staff handoffs.
3. Stress-test late collections and supplier changes.

Final review

Close your notes and answer these in the interactive course. Revisit any missed lesson before attempting the reworded check.

1. A major contract may terminate on change of control. What does the buyer do?
2. Seller earnings include an unsupported $150k adjustment. How should the buyer treat it?
3. Why model a downside cash case after acquisition?

Use it in your setting

Replace one fictional example with facts from your field. Name the decision, evidence needed, and the first assumption to verify.

All examples are educational. This printout does not create a verified grade, enrollment, or credential.

Sources and further reading

Original Aim High Hero explanations and fictional exercises. External sources do not endorse this course.

• U.S. Small Business Administration — Plan your business: buy an existing business
• Investopedia — Acquisition overview
• ExitBig — Business acquisition guide
• Permanent Equity — First smaller company
• Davis Business Law — Practical guide
• Entrepreneur — Five acquisition considerations
• eCapital — Acquisition glossary