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Beware of the Zombie Business Buyer!

This week, I added a new category to our CRM database. To sit alongside the traditional TRADE BUYER, PRIVATE EQUITY, INVESTOR definitions, I have created the new option – ZOMBIE BUYER to help protect our client’s business interests and time…

A zombie buyer is simply an individual or newly formed company looking for a successful host business to take over. Generally they lack the required cash, sector experience or previous track record you would expect a serious buyer to possess; the zombie buyer believes they can take control of an established business without risk and at a greatly reduced value because they have attended a seminar or training course on how to buy and merge businesses.

For over 10 years, I have been helping business owners prepare and sell their business as part of their retirement and exit preparations. As all experienced advisers can verify, there has always been a few buyers in the market who consider retirement sales as easy pickings, they specifically target and prey on business owners preparing to exit. Their goal is to put together some form of deal with little or no money down on completion, but instead a promise of a great future pay out once they have developed the business, all of course at the sellers risk.

Recently, these few have become many, fuelled by these seminars and courses that promise quick success by acquiring established businesses with no money down or risk to yourself. A concept that acts like a magnet for “wantrepreneurs” and others who want to believe that building a business empire is quick, easy and risk free. Let’s be honest, experienced and successful business owners are commercially astute, rarely suffer fools and the few that may get drawn into this type of discussion will eventually reject the one-sided proposal. Currently there is much buyer activity for businesses with a turnover between £500k and £3m, this week alone I have identified over 10 new zombie buyers.

Here is the problem, the Zombie buyer is not open or honest from the start about their intentions, they pretend to be something they are not, purposely creating ‘smoke and mirrors’ with websites, testimonials, claims of international offices etc. The zombie buyer will try to lull you into a false sense of security on the promise of a compelling business offer, will access commercially sensitive company information to put together their proposal, all at your risk, time and effort. A life and business distraction that leads nowhere positive for the seller.

The bottom line is that no business owner invests their cash, blood, sweat and tears in a business and then wants to give it away to a stranger on the promise of ‘jam in the future’. Business is tough and sometimes people get things wrong, if a business is in decline or distressed, there may be a case for a completely structured deal with an experienced entrepreneur with the relevant industry connections, however this should only ever be considered as the last resort, after exploring all other business and exit options.

We all know that any business is only worth what a buyer is prepared to pay. If you look hard enough, you will see there are always many genuine buyers in the market for established businesses. Buyers who understand the concept of win / win and are prepared to put their hand in their pocket to acquire your business. If you put some time and effort into confidentially marketing your business and talking to not one, but a small handful of motivated buyers, you will quickly realise that a zombie buyer can only ever succeed with an apathetic business owner who has given up.

You may have recently received a letter direct from a buyer / investor, if so, be on your guard. Don’t be flattered or believe that for one moment that your business has been uniquely identified or is the only business that has been approached, the same marketing letter has probably been sent on mass to every Tom, Dick and Harry of the qualifying size or location.

If the time is right for you to consider an exit and you are tempted to respond to a current or future letter, do your research. Firstly, check them out on Companies House, if it’s not a Limited Company, dig even deeper. If they are as professional and successful as they imply, let them introduce you to previous business owners who have experienced a successful and profitable exit with them. If all you get in return is promises and ‘hot air’, it’s probably best to walk away.

Remember, your solicitor, accountant or friendly business adviser will always be happy to discuss your options, so talk to them in confidence and let them share their thoughts and knowledge. Many will have experienced similar zombie client approaches in the past.

Most business owners have more exit options than they realise, you only sell a business once, do it right and with no regrets.

If you need guidance on selling your business or preparing for your exit, contact one of our team of business sale and exit advisors today at info@vexus.co.uk or call 0330 133 2020.

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