Buying into (My Employers) Company: Is There a Type of Business Professional/Advisor I Can See for Advice?

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  cypher67 on 27/02/2015 - 21:25

  +1

  Defo need a lawyer to look over the contracts. Need to make sure there is no clause that can screw you, also you would wanna make sure you are going to get your money back. If I owned a business and it was making good money with opportunity for growth I wouldn't be selling it off.

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    Stingo on 28/02/2015 - 01:48

    One way to motivate your employees is for them to have "some skin in the game". I'm a little surprised if you're that valuable an employee you haven't been given some small amount of shares till now based on performance and are offered 10% rather than a variable amount up to 10%. That smells a bit suss to me. There shouldn't be too much of a contract if its a Pty. Ltd.company, it should just be a contract to purchase shares, which should be straight forward for a cash purchase in full. You'd probably find it worthwhile to read Benjamin Graham's classic - "The Intelligent Investor" for a conservative view of what to look for in a balance sheet, though its argued to be too conservative to purchase companies with decent prospects - so maybe a book on Warren's Buffet's (a Buffett disciple) methods as well.

    Let's just say you're going to have to be pretty lucky for this to be the best investment available to you.
    One thing you hopefully have going for you is that you understand the business. If you don't then you shouldn't own a piece of it - according to Buffet - let alone be a director.

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  boonanza on 27/02/2015 - 21:30

  Firstly I would get your own independent solicitor & also accountant to go through everything. Also I doubt 10% ownership would make you a director, that would mean you are the boss.

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  horsome on 27/02/2015 - 21:43

  A good quality accountant would be a good start, getting due diligence done on the figures would be first action, then legal help follows of you are interested in proposal to look at contracts and even ones which haven't been considered by vendor coz it doesn't interest them (like what happens to your bosses shares if he dies).

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  dandandan on 27/02/2015 - 21:51

  +1

  You want to make sure there is not a whole heap of personal things running things through the accounts. You should be getting 10% of the annual profits for your equity position.

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  Typical16-bitEnjoyer on 28/02/2015 - 07:48

  +1

  Be wary.

  My guess is he just wants you to buy a share, allowing you access to the books but no real decision making capacity.

  Is this company large enough to be listed? Larger companies can reward employees by giving them/selling them shares to feel "involved", if the company does well then the shares increase in price and you can sell them. If this is the case you are fairly safe and can cash out when you like (subject to agreed terms on purchase)

  If the company is just small and not listed, he gets a bunch of upfront money for your 10% share, but how exactly you sell or profit from this 10% is sure to be hazy and you need to speak to a solicitor.
  ie. if he never sells the company you get nothing…
  if he winds it up you will get nothing….
  you can only sell the 10% back to him but he needs to agree, which he never will..
  you cannot sell your share and can only buy his 90% in the future at a price which is inflated….

  I've seen this happen. It gets the employees motivated and "involved" in the small business, they work their butt off to increase the perceived value of the business, but when it comes time to move on or if the business hits hard times, they generally will never see the money they spent for their investment back again.

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    Stingo on 28/02/2015 - 21:06

    Yep, small shareholders can be at the mercy of larger ones. I believe he should be free to sell his share to someone else (he should insist on that ultimate right) but unlike the publicly traded shares of large companies the market is not very liquid, so forced sale would result in a massive loss of value.

    He should still get dividends. At this stage the company should be paying more of its profits as dividends and money borrowed for working capital since interest rates are so low. Of course, if the banks won't lend (without personal guarantees) that tells you something right away.

    The value of shares should also reflect the value of the company in the long run at least (short term its mainly dependent on the mood of the buyer. As Graham says: "In the short term the market is a voting machine. In the long term it is a weighing machine."

    I'm not quite as pessimistic as you are but the OP needs to look at this as an investment on its own merits independent of him working there. Unless you're in accounts, or maybe sales you really have no idea how well your company is doing.

    Unfortunately, I fear he is being pressured by his boss to invest to show loyalty.