Mergers and acquisitions of big companies are always in the news. These high-stakes deals are fun to watch, can be very profitable or result in total busts. Companies can grow much quicker through acquisition than by growing themselves.
Think about it...
Wouldn’t it be easier to let someone else do the work? Then, when they have it running well, you just swoop in and buy the business. It sure saves all the grunt work of prospecting for sales, R&D and relentless cost cutting on your own.
The same goes for real estate. All real estate investors would like to buy a turn-key property, fully rented and cash flowing like crazy. No rehab. No delays in cash flow while you fix up the place. Just money in your pocket.
But there’s one catch: Successful businesses cost money. Lots of money. There’s a lot of people who want easy money. They bid the price up.
That’s why we buy the foreclosures. The dumps. The probate properties. Because we are willing to do the hard work in exchange for a cheap initial price.
Many other people pass on those properties. And that keeps the price low.
But every so often, you find that diamond in the rough. There’s a reason you do all that networking and advertising. Sometimes someone presents you with a really nice house. At a really nice price. And that’s where the big profits are made.
A ‘Diamond in the Rough’ Website
There is a website that encourages this ‘merger and acquisition’ behavior on a much smaller scale. It’s for smaller, privately owned businesses to connect with people interested in buying businesses.
The site is called, appropriately ‘Merger Network.’ The main idea of the site is to buy and sell businesses. As of the writing of this lesson, there were over 15,000 active sellers of businesses subscribed to the site, and 15,000 active buyers.
Your first thought is probably: “I subscribe to Real Estate Mogul because I’m a house flipper/landlord. I don’t want to buy and sell other businesses.”
Take a step back though. What are some things you need in your house flipping or rental business?
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Information on demographics in your area
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Private lenders that can fund your business
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Other potential real estate plays like mobile home parks, RV parks, assisted-living homes, commercial buildings, etc.
Are the wheels starting to turn? Let’s take these one at a time.
Demographic Information
Real estate is all about ‘location, location, location.’ When you look at a potential property to flip or rent out, don’t you want to know about the area?
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Crime statistics
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Quality of schools
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Infrastructure (how easy is it to commute, etc.)
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Is it growing or shrinking with the population?
Guess what… area businesses want to know those statistics too. When businesses move into an area, they have done their research, and they want the same thing you want.
Plus, when businesses move into an area, people move into an area. When people move into an area, demand – and prices – go up.
Merger Network has a search tool to see if buyers are looking or sellers are trying to get out of a particular state:
Although the charts are statewide for businesses on the website, it might alert you to sudden drops in business activity – or even long term trends.
Private Lenders
Buyers of businesses have capital. Or access to capital. They want a good return. Do you think you might be able to give them one?
Well, there’s a ‘network’ part of Merger Network that can help here...
Once you become a member of Merger Network, you can search buyer profiles or use other networking tools. Once you create a profile, you might have other people searching you out.
Business owners also have money. Even if you are not actively looking to buy another business, it might be good to connect with the other business owners who are trying to sell.
You can also use the networking feature to find private equity investors directly. Just search for private equity lenders:
Maybe you have someone in your network who would be interested in buying a business? If so – hello wholesale commission!
Maybe those other business owners will need somewhere to invest their cash once the sale goes through. Know any places they might want to put it?
You can become a member of Merger Network for free, but it will only give you 5 connections for networking. For less than a decent meal out per month, you can gain access to a whole lot more members, either on the buy or sell side. For about $70/month, you can have full access to both:
Diversified Opportunities
Many of the businesses featured on Merger Network are real estate businesses:
There may be opportunities here to diversify your real estate business through acquisition, rather than growth.
Real estate businesses are not just listed on the MLS with lots of competition, like residential properties. With businesses, you are competing with that family who is willing to pay a higher price for a home to live in.
You may have some knowledge that others don’t possess. So just like that ‘pocket-listed’ flip that nobody else knew about, you might recognize business value where others do not.
There are also business brokers listed in the networking pages of the site:
Business brokers can help fill commercial properties and can help you seek out deals like regular Realtors do for residential properties. Something to think about.
Merger Network is all about making deals, just like most real estate investors. It’s just a different type of deal. Maybe it’s time for some diversification in your networking.
Perform Your Due Diligence – You may make your money when you buy, but you find the right buy through hard work prior to closing.
Network Where the Money Is – Think about where wealthy investors hang out. Then start hanging out in those places. Private money doesn’t find you – at least not until you have a great track record.
Broaden Your Horizons – The best deals are the ones located where nobody else looks. Is it worth looking beyond traditional residential properties?