Purchase competition?

[Bobjob]

I've had this question on my mind, I thought I'd share.

You manufacture propellers for boats. You've been in business for 20+ years, you have a very solid business and so has one of your competition (who is located in another state). The difference between the two of you is you make a four blade propeller and they make a six blade propeller. You find out their facility experienced a flood and the owner wants to take the insurance money and retire, he wants to sell what is left of his business. I realize there are many variables involved, but let's say you don't see any of them as a problem (financing, logistics, etc). My question is, would you purchase this business (which has a good name in the industry) with it's customer base? Or do you chance they completely go out of business making one less competition? And you may or may not pick up some of their customers?

What would you do and why?

[CCAdamson]

What would you be buying? A patent? A building? Inventory? Customer list?

My initial thought, since they actually make a product different than yours, would be to purchase them and manufacture both styles. If you don't do it someone else will right. If they have a good name and quality product, and your existing company does too, then a merger of the two would probably be successful. Again, that is with basic information. Good luck in whatever you do.

[Owen]

I've had this question on my mind, I thought I'd share.

You manufacture propellers for boats. You've been in business for 20+ years, you have a very solid business and so has one of your competition (who is located in another state). The difference between the two of you is you make a four blade propeller and they make a six blade propeller. You find out their facility experienced a flood and the owner wants to take the insurance money and retire, he wants to sell what is left of his business. I realize there are many variables involved, but let's say you don't see any of them as a problem (financing, logistics, etc). My question is, would you purchase this business (which has a good name in the industry) with it's customer base? Or do you chance they completely go out of business making one less competition? And you may or may not pick up some of their customers?

What would you do and why?

I wouldn't make the move to buy unless someone else is planning on making a bigger company out of it or if they have something that can help you (like the six blade propeller).

[Fulcrum]

Considering that you are complementary competitors (4 blade from you and 6 blade from him) with some overlapping customers (but probably not many) you would be better suited to take over, as opposed to another guy. I'd seriously pursue it. I would want to know exactly what I'm getting though.

1) What, exactly, would be included in the sale? I'm going on the assumption that most of the equipment is ruined, as well as a good portion of finished goods.
2) Would the current owner be willing to allow the insurance company to first replace the destroyed equipment and then sell? New equipment is almost always nicer than used:D
3) In the event of #1 above, do you have the capacity to take on the new manufacturing while maintaining both the quality and delivery of both companies?

[Andrew Norton]

I'd go for it too. Judging from my experience, it's always a good idea to grow a business. However, first I would make sure the equipment is (or will be, if it needs repairs) completely functional, so I can keep selling on the market he has already settled in. But the good thing is you not only get a new product to sell, but also a new market to sell your old product to.

[journalist55]

My personal opinion is I would not take the chance in purchasing their business. Now that they will be out of the game I believe this would bring more customers your way already. Just keeping your own business and leveling it up will be less stress.