1.6.3 Acquisitions and buy-outs
Acquisitions and buy-outs mainly arise when a community is driven to rescuing a local business threatened with closure or, in exceptional circumstances, where the community feels poorly served by the business. Communities engaged in acquisitions and buy-outs face all the same challenges as pre-start initiatives, but with the extra burden of:
- having to act quickly, especially if there is competition to buy the business or its principal assets
- having to commit to development costs with no certainty that it will be successful in acquiring the business, with the risk of substantial losses
- the difficulty of agreeing a fair valuation for the business, especially when the principle assets are worth more as non-business assets.
The first of these challenges can be moderated by using the powers included in the Localism Act to list Assets of Community Value. This gives communities six months in which to prepare a bid to purchase a listed asset if it is put up for sale.
Compared with a new-start enterprise, an advantage of acquisitions and buy-outs is that at least the business in question has a track record, which provides a benchmark for planning performance improvements.
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