Project description
An entrepreneur from southern Germany had the opportunity to buy a chain of hairdressing shops. He asked us to examine to what extent the asking price was appropriate and what potential there was to increase profits.
We analysed the profitability of the shops and found significant differences in turnover, costs and staff productivity. This led to a number of questions, which we discussed with the previous owner. From the information we gained an understanding of the earnings situation and the opportunities and risks for future profit development.
For the purchase price negotiation, we provided an argumentation that justified a low purchase price.
And for the buyer, we derived a potential to increase profits that he can realise if the company is managed by him.
What to include in a business plan for a company acquisition
When a business is bought, the price must be justified. The plan should present the valuation approach, such as discounted cash flow or multiples, the key assumptions behind earnings and the comparison with similar transactions.
Financing the purchase requires clarity about equity, bank loans and possibly seller financing. The plan should show how the target’s cash flow covers debt service, which risks come with the transition (key customers, employees, contracts) and which synergies or improvements are realistic.
Sensitivity analyses on revenue and margin show what happens if the acquired business performs worse than expected, which is what credit committees look at most closely.
