Three D's Business Buying
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A framework for identifying valuable business acquisition opportunities through three key situations that often lead to businesses being sold below market value.
The Three D's Framework
-
Death
- When business owner dies and kids don't want to inherit
- Creates opportunity to purchase from estate/heirs
- Often leads to motivated sellers
-
Divorce
- Business needs to be sold as part of divorce settlement
- Creates urgency to liquidate assets
- Can lead to below-market pricing
-
Distressed
- Business took on too much risk
- Company needs quick sale due to financial problems
- Opportunity to buy below intrinsic value
Real Example Mentioned
- Speaker bought business from supplier
- Would have normally cost $15-20 million plus inventory
- Ended up purchasing for just cost of inventory
- Result: Got entire business for fraction of value
- Additional benefit: Cut COGS in half since it was a supplier
Key Takeaway
- These situations create opportunities to:
- Buy businesses below market value
- Acquire assets at significant discounts
- Take advantage of motivated seller situations
- Find deals others might miss
- Get better terms than in normal market conditions
50:02 - 52:08
Full video: 57:21SP
Shaan Puri
Host of MFM
Shaan Puri is the Chairman and Co-Founder of The Milk Road. He previously worked at Twitch as a Senior Director of Product, Mobile Gaming, and Emerging Markets. He also attended Duke University.