If you want to do business in Singapore, you have two main options that you can choose. You can either establish a new company or buy one that already exists. The latter can be much easier to do, especially if you have limited information related to the Singapore business market. Instead of initiating a new business from scratch, the option of leveraging the numerous locally incorporated companies can be much more beneficial. Acquiring an already-established company proves to be convenient, and you will only need a little time to do it!
What are the Pros and Cons of Buying an Existing Business?
What to Consider Before Buying an Existing Business in Singapore?
Even though buying an existing business in Singapore can be a rewarding endeavor, there are quite a few things that should be considered if you decide to do it. Below are some important considerations that you have to keep in mind before buying an existing business in Singapore.
1. The Model
In Singapore, there are various acquisition models that you as a prospective buyer can choose from. For example, you have the option to acquire the entire company or only its assets. But do keep in mind that each model comes with its benefits and drawbacks.
2. The Existing Risk
Every business operates within a specified context and economic environment. Thus, making it susceptible to a certain level of risk. To ensure a thorough understanding of potential losses in the acquisition, a comprehensive investigation of the company that you want to purchase is essential.
3. Assets & Liabilities
You will also need to assess the prospective company assets and liability thoroughly, to gain insight into critical assets such as intellectual property. For example, you will need to know whether the company possesses ownership of the trademark and trade name it operates under, or if any noteworthy innovations warrant patent protection.
4. Important Contracts
To gain a comprehensive understanding of the business's past success, it is essential to delve deep into its current strategies. Thus, you might need to examine the key aspects that the employees have, such as whether there are top employees that you want to retain, contracts with supplies for ongoing operations, and many others. Additionally, you should also scrutinize significant contracts such as lease agreements. You want to ensure that the landlord is willing to transfer the lease to you.
5. Licenses and Permits
Some businesses in Singapore might need to have special licenses or permits to operate legally. For example, construction and engineering firms need to have special licenses to comply with safety regulations and environmental standards. Food and beverage establishments will also need a permit to ensure compliance with health and safety regulations, food handling standards, cleanliness, etc. Thus, if you are considering purchasing a business that falls under these categories, it's crucial to verify that the previous owner has adhered to all regulations and obtained the necessary licenses and permits.
6. Financial Due Diligence
Ask the business to share all its financial details so you can see how much money they make right now. This will help you figure out how much the business is worth. As this can be a complicated process, you might want to get help from an accountant or a lawyer to do this properly.
7. Compliance with Tax and Legal System
It is important to ensure that the business you want to buy is following the right tax compliances and legal system of the country. You need to verify the accuracy and regularity of past filings, to ensure everything is spot on. To do this, you might want to consider consulting a reputable accountant or tax consultant for assistance in ensuring compliance.
How to Buy an Existing Company in Singapore?
Find the Right Business
If you want to buy an existing company in Singapore, the first thing that you should do is look for the right business that aligns with your goals, values, and expertise. This involves conducting extensive market research to understand the industry landscape, target market, and potential growth opportunities. When looking for an existing business to buy, you should also consider factors such as the company’s financial performance, market position, reputation, and scalability.
Due Diligence Process
Due diligence is a critical step in the acquisition process which allows you to assess the business’s assets, liabilities, financial performance, legal obligations, and any potential risks. Conduct a thorough review of the company’s financial statement, tax records, contracts, licenses, intellectual property, and any other operational process. It’s imperative to verify that the business indeed provides the services or goods it claims to do. A due diligence process can help ensure transparency and inform decision-making, helping to mitigate risk and negotiate favorable terms.
Enter Into Negotiation
Once you’ve completed the due diligence process and are satisfied with the information gathered, you’re ready to initiate negotiations with the business owner. Keep in mind that you can not only negotiate on the asking price, but every aspect of the business is open to negotiation too. Negotiations can indeed be complex and time-consuming, even requiring multiple discussions to reach a consensus on the sale price and terms.
Draft Sales and Purchase Agreement
This part involves determining the purchase price, payment structure, allocation of assets and liabilities, representation and warranties, non-compete agreements, and other key terms. Negotiate in good faith while protecting your interest to ensure a fair and equitable transaction for both parties. You will also need to seek legal guidance to draft a comprehensive purchase agreement that reflects the negotiated terms and protects your rights as the buyer.
Structuring the Transaction
This step involves determining the most appropriate legal and financial structure for the acquisition, considering factors such as tax implication, liability protection, and financing options. Common transaction structures also include asset purchases, stock purchases, or even mergers.
Signing the Deal
After finalizing the terms of the sale, the transaction culminates in signing the deal and executing the purchase agreement. This formalizes the transfer of ownership from the seller to the buyer, marking the completion of the acquisition process. Ensure all necessary legal and regulatory requirements are met, and any closing conditions are satisfied before closing the deal. To facilitate a smooth and successful closing, you need to coordinate with legal counsel, an expert team, financial advisors, and other relevant parties.
Notify the Accounting and Corporate Regulatory Authority (ACRA)
After the sale is finalized, you must inform the Accounting and Corporate Regulatory Authority (ACRA) within 14 days about any alteration to the business name, shareholders, registered address, or appointment of company officers and auditors.
Conclusion
If you’re considering purchasing an existing business in Singapore, now is the best time to take action. And worry not, Wealthbrige's team of experts is here to support you every step of the way. We will provide you with expert guidance and assistance throughout the acquisition process. Contact us today to begin your journey towards owning a thriving business in Singapore.