Last updated: 2026-02-19
Buy a Business India
15 min read
How to Buy a Business in India: Step-by-Step Guide (2026)
Buying an existing business is one of the fastest paths to entrepreneurship. This guide walks you through the complete process of acquiring a small business in India — from finding opportunities to closing the deal.
What are the steps to buy a business in India?
The business acquisition process in India consists of seven key phases: criteria definition, search and screening, initial evaluation, due diligence, negotiation, closing, and transition. The entire process typically takes 4-9 months.
| Phase | Key Activities | Typical Duration |
|---|---|---|
| 1. Define Criteria | Industry, size, location, budget | 1-2 weeks |
| 2. Search & Screen | Find opportunities, initial calls | 2-4 months |
| 3. Initial Evaluation | Review financials, site visits | 2-4 weeks |
| 4. Due Diligence | Deep investigation, verify claims | 4-8 weeks |
| 5. Negotiation | Price, terms, structure | 2-4 weeks |
| 6. Closing | Documentation, fund transfer | 2-4 weeks |
| 7. Transition | Seller handover, relationship building | 30-90 days |
Key Insight
Most buyers review 50-100 opportunities to find 5-10 worth pursuing, and ultimately close on 1. Be prepared for a numbers game — persistence and systematic searching are more important than luck.
Step 1: How do you define your acquisition criteria?
Start by defining your ideal acquisition target based on four factors: industry, size (revenue and profit), location, and budget (total capital you can deploy). Clear criteria prevent wasted time on unsuitable opportunities.
Key Questions to Define Your Criteria:
- Industry: What sectors match your experience? What industries interest you?
- Size: What revenue and profit range is realistic for your capital and skill?
- Location: How far are you willing to travel? Remote management possible?
- Owner involvement: Full-time operations or semi-absentee?
- Growth vs stability: Turnaround project or steady cash flow?
- Budget: How much can you invest without financial stress?
Step 2: Where do you search for businesses for sale?
Search for acquisition targets through online marketplaces (SMERGERS, IndiaMart, BizBuySell), business brokers, CA networks, industry associations, and direct outreach to business owners. A multi-channel approach is essential since India lacks a centralized business-for-sale platform.
Search Channels (Priority Order):
- SMERGERS — India's largest SME marketplace
- Business Brokers — CAs and M&A advisors often have unlisted deals
- IndiaMart Business Transfer — Strong for manufacturing, trading
- Industry Networks — Trade associations, supplier referrals
- LinkedIn Outreach — Direct approach to business owners
- CA/CS Referrals — Professionals advising business exits
Key Insight
80% of small business sales happen off-market. While online listings are a good starting point, the best opportunities often come through relationships — CAs, lawyers, industry contacts, and direct outreach.
Step 3: How do you evaluate a business opportunity initially?
Initial evaluation involves reviewing seller-provided financials, understanding the business model, assessing owner dependency, and determining if the opportunity merits deeper investigation.
| Red Flag | Significance | Action |
|---|---|---|
| Declining revenue (3+ years) | Structural problems | Investigate cause or pass |
| >40% revenue from one customer | High concentration risk | Factor into price/terms |
| Owner works 60+ hours/week | High owner dependency | Assess operability without owner |
| Seller unwilling to finance | May doubt sustainability | Proceed with caution |
Step 4: How do you make an offer (Letter of Intent)?
Once initial evaluation is positive, submit a Letter of Intent (LOI) outlining proposed purchase price, deal structure, key terms, and conditions including exclusivity and due diligence period.
Standard LOI Components:
- Purchase Price: Proposed amount and how you arrived at it
- Deal Structure: Asset purchase or share purchase
- Payment Terms: Down payment, seller financing, earnout if any
- Exclusivity Period: 60-90 days typically
- Due Diligence Scope: What you'll investigate
- Conditions: Financing, due diligence results, lease transfer, etc.
- Proposed Timeline: Target closing date
Step 5: What is involved in due diligence?
Due diligence is the comprehensive investigation of all aspects of the business—financial, legal, operational, customer, and employee—conducted after LOI signing and before final commitment. This phase typically takes 4-8 weeks.
For a detailed framework, see our Due Diligence Checklist.
Step 6: How do you negotiate the final deal?
Use due diligence findings to negotiate final purchase price, deal structure, representations and warranties, indemnification provisions, and transition arrangements.
Step 7: What documents are required to close?
The closing requires execution of the purchase agreement (Asset Purchase Agreement or Share Purchase Agreement), transfer documents for assets and licenses, and funds transfer through proper banking channels.
Key Documents for Asset Purchase:
- Asset Purchase Agreement (APA)
- Bill of Sale for movable assets
- Assignment and Assumption Agreement (contracts)
- Non-compete agreement
- Transition services agreement
- Employment agreements (key staff)
Step 8: What should you do during the transition period?
The post-closing transition period (typically 30-90 days) involves the seller introducing you to customers, suppliers, and employees while you learn operations and take over day-to-day management.
Key Insight
Don't make major changes in your first 90 days. Spend that time learning the business, building relationships, and understanding why things work the way they do. Premature changes often backfire.
Frequently Asked Questions
Do I need a broker to buy a business in India?
No, you don't need a broker, but working with one can significantly accelerate your search and provide access to off-market opportunities. Brokers earn their fee (typically 2-5% of transaction value) by aggregating opportunities, handling initial screening, and facilitating negotiations. For buyers with limited time or industry networks, brokers provide valuable services. However, you can also search independently through online platforms, direct outreach, and professional networks. Many buyers use a hybrid approach: work with brokers for certain deal sizes or industries while conducting independent searches simultaneously. If you use a broker, clarify their fee structure, exclusivity requirements, and whether they represent the seller (most do).
How do I know if a business is priced fairly?
A business is priced fairly when the asking price reflects 2-4x verified annual profits (SDE or EBITDA) adjusted for risk factors like customer concentration, owner dependency, and industry trends. Calculate the implied multiple: divide asking price by annual profit. Compare this multiple to industry benchmarks and similar recent transactions. A ₹50 lakh asking price for a business with ₹15 lakh verified annual profit implies 3.3x multiple—reasonable for a stable business with diversified customers. The same price for ₹10 lakh profit implies 5x—high unless there's strong growth trajectory or strategic value. Due diligence will reveal adjustments to stated profits that affect your fair value calculation.
Should I buy through an asset purchase or share purchase?
For most small business acquisitions under ₹2 crore, asset purchase is recommended because it provides better protection against inheriting unknown liabilities. In an asset purchase, you buy specific assets (equipment, inventory, customer lists, brand) and leave the legal entity with the seller. Any undisclosed liabilities remain the seller's problem. The downside: you must transfer each license and contract individually, and some licenses may not be transferable. Share purchase is simpler for continuity—you buy the company itself with all assets, contracts, and licenses intact—but you inherit all liabilities, known or unknown. Larger deals, especially those involving many contracts or non-transferable licenses, often use share purchase with extensive representations, warranties, and indemnification for liability protection.
What financing options are available for buying a business in India?
Business acquisitions in India are typically financed through buyer equity (25-50%), seller financing (20-40%), and bank loans (15-40% for asset-backed portions). Unlike developed markets, India lacks dedicated SBA-style acquisition loans, making seller financing often essential. Banks will lend against specific collateral—equipment, inventory, property—but rarely against "goodwill" or business value. Loan Against Property (LAP) is commonly used, where buyers pledge personal or family property as security. Some NBFCs offer business acquisition loans with higher rates (14-18%). For deals above ₹2 crore, institutional investors or family offices may participate, taking equity stakes in exchange for capital and often strategic value.
Can I buy a business while still employed?
Yes, many buyers acquire businesses while employed, starting with a semi-absentee model before transitioning to full-time ownership. Look for businesses that can operate with a manager in place or require limited owner involvement (20-30 hours/week). Service businesses, franchise operations, and e-commerce businesses often fit this profile. Be transparent with yourself about time availability—underestimating required involvement is a common mistake. Plan for a transition period where you may need to take leave or work reduced hours. Some buyers negotiate a longer transition period with the seller specifically to accommodate their employment situation during handover.
Related Questions
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