6 Ways to Buy a Company Without Using Your Own Cash
In the world of M&A, purchasing a business without fronting your own capital is a strategic play that savvy investors often explore. This approach provides a unique avenue for acquiring assets, expanding portfolios, and scaling operations with minimized financial exposure. Let’s dive into six methods to achieve this goal, from deal structuring to creative financing techniques, with insights into how each approach can offer unique advantages for investors.
1. Distressed Deals: Taking Over Liabilities
Distressed companies can present golden opportunities for strategic investors. In this case, instead of paying a hefty purchase price, you take on the company’s liabilities. While this may sound daunting, remember that you’re acquiring assets and operations that may be mismanaged or underutilized. Bringing fresh perspectives and resources to a struggling company can often turn the tide, as highlighted by Paul Tudor Jones:
“Where others see risk, the best investors see potential.”
2. Use Other People’s Money (OPM)
In many deals, investors bring in partners who want exposure to acquisitions but prefer a passive role. By selling a portion of the company’s shares to these investors, you raise the upfront capital required for the deal, which goes directly to the seller. This way, your partners fund the acquisition, while you focus on optimizing operations. As private equity pioneer David Rubenstein noted, “Collaboration can create value that’s larger than the sum of individual investments.”
3. Seller Financing: Deferred Payments
In seller financing, you agree to a payment structure that allows deferred payments over several years. For example, if the company’s price is $1 million, you could spread payments over five years. Sellers often agree to such terms when they’ve struggled to find a buyer, and a reliable payment structure is more appealing than holding onto the business. This is especially advantageous for investors looking to maintain liquidity while taking control of a new business.
4. Real Estate Divestment Strategy
Many businesses own valuable real estate, which can be a game-changer. In this strategy, you work with a real estate investor who purchases the property while you buy the business. The real estate proceeds go to the seller, while you use the cash flow from the business to pay off the rest of the purchase. Real estate mogul Stephen Schwarzman has long supported the idea of creative deal structures, remarking that “the best deals are those that make sense from every angle.”
5. Asset-Based Financing
Asset-based financing allows you to secure loans against the company’s assets, such as equipment, inventory, or accounts receivable. By using these assets as collateral, you generate the cash needed to fund the acquisition. This approach resembles a mortgage: while you don’t own the business outright initially, you leverage its existing value to secure financing. The key is in assessing the true value of these assets—a skill emphasized by investment icons like Glen Greenberg, who advocates for understanding an asset’s intrinsic worth.
6. Using the Company’s Own Cash Flow
When a business has significant cash reserves, you can structure the deal to use these funds as an initial payment. For instance, if the company has $500,000 in the bank, you could factor this into the purchase price, allowing the seller to benefit from tax savings on the transaction. By pitching this as a mutually beneficial approach, you show the seller how they benefit financially. This approach can lead to a win-win outcome and accelerate deal closure.
Final Thoughts
Buying a business without your own capital is about recognizing opportunities and structuring deals creatively. Each of these methods offers unique benefits, whether you’re acquiring a high-growth startup or a stable cash-generating business. As Stanley Druckenmiller said, “The best investments are the ones you don’t have to pay for twice.” These six strategies provide a toolkit for investors seeking to expand without heavy upfront costs.
领英推荐
In my career, I've been fortunate to work across a wide spectrum of M&A transactions, gaining experience that spans over a decade and covers both buy-side and sell-side engagements in industries ranging from FMCG to the industrial sector, and IT. My M&A journey began in 2005 with my employer, Pure Water Company, as we acquired key bottled water production assets—including plants and delivery networks—from Nestlé Waters, following its acquisition of Svyatoy Istochnik (now part of Alfa Group Consortium via Borjomi). In this pivotal role, I managed the critical tasks of post-merger integration and the retention of Svyatoy Istochnik’s corporate customer base in Novosibirsk. This experience laid a solid foundation for my M&A career, which has since evolved through increasingly complex transactions, each enriching my strategic insight and operational expertise.
In subsequent involvements with companies like REHAU and NSG Group, I expanded my role to encompass the other parts of the M&A cycle: conducting due diligence, negotiating terms. Each engagement deepened my understanding of the intricacies of mergers and acquisitions, from assessing market potential to defending investment projects before internal credit committees.
The acquisition of MAXGEN PROMO, an IT venture I co-founded, by the largest digital advertising holding in Eastern Europe in 2019 (now part of Tochka Bank), was a particularly pivotal experience. Managing both the strategy and tactical execution, I oversaw everything from buyer identification and valuation to structuring the deal, performing numerous due diligence exercises, and transferring intellectual property rights. This transaction was made even more challenging by a management buyout element, adding layers of complexity in both the initial acquisition and a subsequent exit two years later. Despite difficult market conditions, I successfully restructured the deal, realigned buyer interest, and navigated the process to completion—essentially managing an M&A process twice within a single transaction timeline.
These experiences have equipped me with a unique perspective and practical knowledge of the M&A landscape, from early-stage assessments to intricate finalization stages. For those considering their own M&A journey or looking to strengthen their organization’s approach to acquisitions, I welcome the opportunity to discuss strategies or share insights from my background in both growth and exit scenarios. I’m confident that my experience could be a valuable asset to your organization’s M&A initiatives.
This article outlines my approach and key insights into “6 Ways to Buy a Company Without Using Your Own Cash,” highlighting methods that mitigate personal capital risk while enabling strategic growth. With years of hands-on experience in M&A, I’m always available to answer questions or explore how these strategies can be customized to fit your unique goals.
Feel free to reach out, and I’d be happy to discuss how my expertise can help drive your M&A ambitions forward.
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Anthony Chernykh
Chief Business Officer at Neomarkets Group
Investor Relations Head | Fiduciary in Capital Raising | Network Expansion for Family Offices and Funds
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