Deciding to buy a business. The individual or company determines what kind of and/or what specific business they might want to buy.

Selecting a specialised company to assist with the purchase. It is important to choose a service company which has expertise in buying and selling businesses, i.e. a business brokerage, in order to get assistance with the purchase.

Making a written agreement with the business brokerage. Ideally, the prospective seller should conclude a written agreement with such a brokerage that states exactly what role the broker is to play. This agreement should state the aspects which the broker is to manage and execute and should clarify not only the broker's obligations but also those of the seller as client. A written agreement must precisely specify the fee, which may be connected to performance and may provide for groundwork and/or stages of the selling process. Another arrangement would be to pay for outsourced work, negotiated to fit the nature of the assignment and then performed at the rate agreed by both parties. It is imperative to select a brokerage which possesses expertise in buying and selling businesses and has a reputation for professional, painstaking methodology.

Analysis - appraising the company's value. It is an excellent idea to have an appraisal carried out on the business which one is thinking of buying. This appraisal and valuation should be conducted by the specialised brokerage, so that it will gain knowledge of the firm's operations and therefore be more capable of providing technical assistance during the buying process. The valuation involved needs to be carried out by a specialist who is not only aware of Icelandic marketplace traditions and current conditions but can also apply a number of technical international principles, depending on the characteristics, type and size of the business to be bought.

Negotiations. By the time negotiations have been completed, it must have been decided how responsibilities will be divided between the buyer and the brokerage and what roles they will each have in later discussions with the seller. This division of responsibilities ought to appear in the written agreement between the parties, if such an agreement is concluded.

Completing the sale. When a transaction is arranged, care must be taken that every major point of the purchase has been clarified and the gist of each point appears clearly in the purchase agreement.

The purchase agreement. In most cases, the seller sees to the final preparation of the purchase agreement and of any other documents concerning the purchase. The specialist who has been participating in negotiations and other aspects of the buying process should preferably also assist the buyer in reviewing the purchase agreement and accompanying documents, both to ensure that the contents are in the spirit of the developing transaction and to safeguard the buyer's interests in the purchase.

Due diligence. The purchaser selects a certified auditor to conduct due diligence, as befits the extent and nature of the transaction and the basis of the purchase agreement.

The final sale agreement. When due diligence has been completed and has either not led to any criticism or else has resolved any dispute over points which it brought out, in addition to removing any possible reservations, the final agreement is concluded. In the final sale agreement, all reservations are cancelled, and settlement of the purchase price takes place. At the same time, operations are handed over from the seller to the buyer. It is essential for the buyer not to neglect any requirements when the operations are handed over, for instance regarding meeting resolutions, official notifications to the Register of Limited Companies, etc.

 

From the first probing into the matter, the buying of a medium- or large-sized company may take three months or as long as nine to twelve months, depending on the type and size of the buying process and assuming that care is exercised in every procedure.