Business in Ukraine: prompts for a buyer | Sale of business

Now You are sure that could help this business to outlive hard times. But what does prevent You to realize these intentions — there is, in fact, a lot of propositions at the market?
The specialists of InterCredit company try to understand, what does today interferes investors to inlay their money in Ukrainian enterprises? And we succeeded to set as follows...

If this business is so good, why does it is proposed for sale?

When company, offering for sale, is already ruining or «more» dead than alive», there is no question about the authentic reason of a deal. Of course, there are not too much persons, interested in acquiring such enterprise – because of the sum, needed to inlay for its reanimation is comparable with charges of untwisting business from a zero. We have to mark also, that a reasonable owner has no reason to wait till pre-selling bankruptcy — in fact in this case he has not got chances to rescue even moderate sum of money.

Other way, if Your have been proposed to purchase quite successful (for first glance) business, bringing already today quite good profit (from preliminary data). Further more, in a post-crisis period this business promises yet more advantageous prospects. Here is the question most painful for a potential buyer: why did a former owner decide to sell one of sources of his welfare?

The best variants in this case could be:
1.The owner has lost his interest for this type of business activity
2.The owner has been planned to move at another place/ sity/State
3.The owner wants to retire and enjoy himself (often closely associate with a previous point).

A little worst variants of veritable reasons would be:
1.The owner needs free money for financing other enterprises which could become a powerful rival to a sold business or can stay the key supplier of spare parts (or the distributor of the ready products)
2.Contradictions between the partners on key questions of further business development strategy (in case of uncoordinated and emotional actions one of them, the buyer`s risks increase considerably).

But the heaviest case is an attempt to sell an enterprise in critical conditions, which had not been noticeable at the first look, so called – with a naked eye. In this case, as a rule, the declared reasons of sale are fully innocent (see point 1), and potential buyer often could not set independently, what hides beneath.

«Determination of veritable reason of sale is major and thus — one of the most difficult moments at the first contacts with a client, — underlines Tatyana Borovskaya, chief of clients department of InterCredit company.

— and very often a deal breaks away already during verification of enterprise, executable at potential buyer`s will. For example, it turns out that acquisition of business carries too high risks and does not guarantee the in the promised future income».

The black cat in the dark room

Since the investor finally succeeds to get a clear idea of reasons, impelling a former owner to sell his business, the real estimation enterprice`s position and state become the task #1.

The first part of this problem could be resolved comparatively easily — because that`s practically impossible to hide geography of business-objects. Besides, in Ukrainian realities practically every (except for, perhaps, recreating) business is potentially more so successful (and, has more high value) than nearer to the Kyev it is located.

Experienced business expert could also cleared and some other parameters:

- amount, quality and perspective of clients
-structure and level of sales organization
-seasonal factors influencing on the dynamics of enterprise`s income forming, etc.

However, it will be difficult to independently «calculate» the veritable level of profitability, real average monthly turnover, present net income amount and (what is more important) what profit could be achieved in short- and medium terms.

Of course, there are methods suitable enough for objective complex estimation of these indexes with reference price forming:
profitable approach — when it is assumed that a buyer will not pay for business a sum, greater than company`s profits for certain period; market approach — when company is estimated by comparison of a few analogical enterprises sales results, and expense approach — when the real value of enterprise is determined on the sum of expenses for business process organization.
But all these methods are quite complicated, labour intensive, and — what`s more important —not reliable enough, the more so, while a lone researcher or the even unspecialized company tries to use them.

«In practice, for the most sold enterprises it`s enough to conduct the express-estimation of business cost, taking into account urgency of sale, - director of InterCredit company Vitaly Guzva marks, — Here an estimation will be got according all three approaches listed above, united in the special method, developed by our specialists».

It is not needed also to forget about such unpleasant surprises, as the possible hidden debt for banks, partners and fiscal authorities. for dissection of which a Some times new owner has to ask for help of accountant company – and not alone one. However, that does not guarantee the «display» of stranger debts even during long months after the purchasing new business — with all effluent financial (and legal) consequences.

An avidity, which smothers...

Alas, a lot of proprietors realized a simple fact, that the real buyer presently could be met on business market with far more difficulty that salespeople. Unfortunately, only some from them have a sober picture of the real prices, taking into account all modern complications which for Ukraine are complemented yet and permanent of home policy instability — mortal for small and middle-level business.

«One of most often errors of business salesman is the conscious starting price overstating , in order to reduce it to the real level, during negotiations, — the director of InterCredit company Vitaly Guzva considers, — however such actions resulting only to tightening of sale process, and don`t withhold the price at high enough level».

Indeed, a serious investor conducts careful market research long before to connect proprietor of the sold enterprise, and knew the real prices knows at very beginning of primary negotiations. In this case an attempt to set too high price for business will be perceived as a display of non-professionalism, or (in worst)— will frighten investor off , as will seem that somebody wants pretty well deceive him.

Besides, according to expert`s estimations, a tendency to sale proposals growth in Ukraine will be saved, at least, to the end 2009- first quarter 2010. Thus, during long time, this market will be the market of buyers, but not of salesman...