Buying a Micro or Small Enterprises in Cyprus

What to do should you wish to buy a small business or micro enterprise in Cyrus, including corporate acquisitions, passive investment and personal or lifestyle businesses...

The Micro to Small Enterprise segment of the market can be differentiated according to the motives and objectives of a business buyer; this is important as it determines the type of approach towards buying (or selling) a business.

Corporate acquisition

In this case, the buyer is a corporation and has a strategic interest to acquire a specific business.

  • If the buyer is a foreign company the acquisition may be a convenient way to establish itself in the Cyprus market or gain a corporate presence in the EU
  • A local corporate buyer may simply aim to increase local market share, geographical spread, enlarge its product line, acquire know-how or a brand name
  • As for the seller, the motivation may be to acquire a strong partner (if the sale is for a majority but not 100 percent of the company) or simply to cash out, if sold in an outright sale

Because Cyprus is a small place, it is not difficult for local corporate buyers and sellers to find each other. Although sometimes an intermediary may be employed to source likely targets, usually the intermediary's role is to ensure confidentiality in the initial stages of approaching pre-determined targets.

Such intermediaries are usually financial services firms which handle mergers and acquisitions, though assistance may be found through accountants, law firms and the corporate finance departments of big audit firms. If the transaction is big enough, it could interest the investment banking or corporate finance subsidiaries of the local banks, although their focus is mainly on listed companies.

With very few exceptions, the above intermediaries are geared towards offering services at a fee rather than on a commission basis. Therefore, the client (whether buyer or seller) will need to make a significant outlay regardless of the outcome.

Personal/lifestyle businesses

The most common motivation for acquiring a business is to secure a source of personal income as owner/manager, while satisfying lifestyle expectations at the same time.

The decision to buy (and sometimes to sell) is not based exclusively on financial criteria; location and general ambiance, manageable business size, experience and skills needed to manage the business, working hours and a host of other subjective elements come into play. For all these reasons, matchmaking between potential buyers of a lifestyle business and sellers is a more difficult proposition; the business has to satisfy much more than just financial or investment criteria.

Passive investments

The passive investment buyer sees the business as just another investment and is interested only in the income this investment will generate. They are usually affluent and wish to diversify from mainstream investments, such as stocks and bonds. They will probably be an "absentee owner".

Because the owner will have to pay a manager to run the business, profitability has to be much higher than a lifestyle business.

The business must be easy to control and monitor through financial audits and other control systems on purchases, expenses and receipts. Therefore, all cash businesses such as restaurants, night-clubs, cafeterias, should be avoided.

Provided the above two criteria are met, a passive-investor type of buyer has a much wider range of businesses to choose from than a lifestyle business type of buyer.

Permanent Residence and Citizenship

Like many other countries, the Cyprus Government has initiated a “passports for investments” scheme, also known as a Golden Visa. Depending on the amount and type of investment, a non-EU citizen may become a Permanent Resident or a Citizen. This scheme is known mostly by real estate buyers but it also applies to business buyers. For details see the Cyprus Investment Promotion Agency website as rules change frequently, with a trend toward becoming less stringent.  This scheme may provide an additional incentive or benefit to Non-EU nationals to acquire a business in Cyprus.

Information provided by DealMasters DM Ltd., Business Sales Specialists Mailing Address: POB 28702, Akropolis, CY-2082 Nicosia, Cyprus Tel (from abroad): +357 22 255 160 Fax: +357 22 255 180 Website / e-mail Copyright © 2015 DealMasters DM Ltd. All Rights Reserved