Buying Shares in a Company
All answers are for general guidance only. Each case must be handled on individual facts.
Q: What’s involved in buying shares in a company and how do I identify target companies?
If you are trying to buy shares in a publicly quoted company, the process is relatively easy. There they are in the FT every day. You can both easily identify the targets and the price by just moving your forefinger down the page.
However when it comes to private companies the task becomes all the harder as the data you require on both the company and its value is just not as available. So a bit more homework is essential.
If you don’t have a specific company in mind, then my own view would be to start with the trade directories and publications within the sector you are interested in. These will give you a general view of the companies within your target range together with a feel for the quality of their presence.
Once you’ve homed in on a few, do your research via the internet. This can yield an enormous amount about a company. Don’t forget to search the chatrooms as well as this can give you some insight into real issues the target faces. Searching on the names of the key players in the company is also a useful form of research.
Finally, use both banks and credit reference agencies as well as Companies House to identify as much information as you can about the financial standing of the companies you have selected.
Making the approach can either be done direct, which vendors often find flattering, or use your lawyer or external accountant to make a more anonymous approach.
Once you’re in contact, spend some time getting to know the vendors. Make sure that what you see is in keeping with the earlier research. If you intend keeping the management team, be certain you can work with them and they can take the company forward in the way you want. Agree the terms of your Confidentiality Agreement (with legal and financial input if required) before you start asking or giving private details to each other.
Then it’s really down to the negotiation. Get your accountant and lawyer involved to assist with providing a price range for the company and be prepared for some lengthy horse trading thereafter. Try and agree all the main terms of the deal at this stage and then draw them up in the form of some “Heads of Agreement”. Make sure that these are subject to contract and subject to formal legal and financial due diligence, as if you find something completely different at this stage, you have the opportunity to renegotiate the price.
Recent Experts
About Robert
View My Profile
- Contact us
- Midlands
- North West
- South West
- Wales
- Yorkshire
- Other regions
- 0121 232 0980
- 0161 907 9711
- 0117 906 5900
- 02920 434500
- 0113 220 4410
- 0161 907 9718
- Insider regions
- Central & East
- Ireland
- Midlands
- North East
- North West
- South East
- South West
- Wales
- Yorkshire