Buying a competitor’s customer base
Buying a competitor’s customer base is a great way to double your customer base overnight. A competitor’s customer base falls within the definition of a “database”, under the Copyright and Rights in Databases Regulations 1997. Databases are also protected under the Copyright Designs and Patents Act 1988.
For more information on UK Copyright Law refer to the Copyright Designs and Patents Act 1988 – UK Copyright Law. For more information on rights in databases refer to the Copyright and Rights in Databases Regulations 1997 UK database rights Law.
Buying a competitor’s customer base, Email and direct marketing Lists
Buying a competitor’s customer base will not only make the market place smaller for you it will also increase your profit potential give you access to reach more customers by marketers for telemarketing calls, email campaigns, and direct marketing, for the purpose of selling your products and services. The price for a customer base even for a business that is not doing so well can range from ten thousand to several hundred thousand pounds.
So what do you need to watch out for if you are involved in buying a competitor’s customer base?
1. Asset – A database acquisition is an asset acquisition. After the acquisition the buyer should own the only copy of the leads, and have the exclusive use of them to target customers. The asset should be transferred with a sale and purchase agreement.
2. Customer consents – You need to ensure that you obtain third party consent to the acquisition where required.
3. Business as a going concern – Often the customer lbase is such a vital part of any business that the sale means the business effectively stops trading and is just a shell that gets dissolved. However in some cases the seller has many different businesses within the same company so the sale of that single asset will not hinder the continuing operation of the business.
4. VAT – VAT is chargeable on mere transfer of assets where the business is not being transferred as a going concern.
5. Jurisdiction – Different jurisdictions have additional rules in relation to the transfer of assets so you should get local advice.
6. Liabilities – There shouldn’t be any liabilities acquired with the database.
7. Due Diligence – Make sure you get a sample of the data so you can verify it. Ensure that the data details are what you want and are comprehensive. Be cautious as the database could turn out to be very general or bogus. Request a preview of titles & companies. This is going to tell you whether the title targets are correct. For instance, if you sell insurance software and are interested in all titles with the word “risk” in them, you’re going to get a lot of personnel that are involved in different kinds of risk related activity. Use this preview to filter the list with exclusion terms. Make sure you don’t have some of those contacts already. Ensure that you minimise duplicates of repeated data. Negotiate a reduction in price for bad data based on a realistic margin for error.
8. Data protection / Privacy – If you’re sending personal data outside the European Economic Area then watch out for Principle 8.
When referring to types of acquisitions in commerce the two most commonplace are asset acquisitions or share acquisitions. Of-course they are totally different, indeed asset acquisitions differ completely depending on the type of asset being acquired. The purchase of land, machinery and stock differs completely from that of intellectual property or goodwill. Whichever type of acquisition you’re doing the issues can be complex and it’s advisable to use solicitors that specialise in business law to prepare and advise on the documentation.
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