🎙️Buying vs Building: M&A Expert Alan Shala on the Strategic Path to Business Ownership

While starting a business from scratch often dominates entrepreneurial discussions, business acquisition presents a compelling alternative path to business ownership. With approximately 40% of UK businesses failing within their first three years, the option to purchase an established enterprise deserves serious consideration.

In my recent conversation with Alan Shala, Head of Corporate Acquisitions at Chelsea Corporate Limited, we explored the intricacies of business acquisitions and why this path might be particularly attractive in today’s market.

Building the Foundation for Successful Acquisition

The journey to acquiring a business begins with assembling the right team. As Shala emphasizes, this isn’t just about having capital – it’s about surrounding yourself with expertise. A complete deal team typically includes a lender for acquisition funding, a buy-side advisor for identifying opportunities, and professionals for both financial and legal due diligence.

The current market presents unique opportunities, particularly with a significant wave of baby boomer business owners looking to retire across the UK, Europe, and North America. However, success in acquisition isn’t just about finding available businesses – it’s about demonstrating value to sellers and building trust from the outset.

“It’s so important that we have a strong relationship with the seller because oftentimes we will retain them in the business for a period of time, six months to two years, three years, perhaps even longer,” Shala explains. This relationship becomes crucial not just for the transaction but for the subsequent transition period.

Navigating Funding and Deal Structures

The financial landscape for business acquisitions is showing promising signs, with declining interest rates making funding more accessible. However, there are clear parameters that potential buyers should understand. Lenders typically prefer minimum loan sizes around £750,000 and favour businesses with strong asset bases or consistent cash flow histories. A track record of three to five years of positive financial records often strengthens the case for funding.

Modern acquisition deals in the UK follow relatively consistent patterns, though with sector-specific variations. Typically, buyers pay between 50-70% of the consideration at completion, with the remaining amount deferred over two to three years. These deals often include performance-based clawback provisions, protecting both parties’ interests and ensuring alignment of goals during the transition period.