Buying a business can be a major event in one’s life, with which comes the advantage of an established reputation and customer base compared to starting a new business. However, established businesses can also have their baggage. You will need to examine details of the business to ensure that it will be a good investment.
Engaging the services of an experienced commercial lawyer to assist with the process can give you peace of mind that all aspects of the transaction are identified and actioned appropriately according to the law and in your own best interests.
Due Diligence will allow you to review the existing business to determine its current position and be aware of risks and potential to ensure its viability. This process involves sourcing a range of financial statements and records, existing agreements, contracts and accounts, credit standing, existing staffing, reasons for selling, and much more. Whilst this can be time consuming, it is paramount to ensure that you review all documents to be aware of tangible and intangible assets, both positive and negative.
Value the business
Documents and details obtained during the due diligence process can assist in valuing the business to ensure the price is fair. While sellers have often had the business valued themselves before listing for sale, getting your own valuation can provide confirmation as to the accuracy of this. This can give you supporting evidence to exit or negotiate changes to the deal if necessary, before you enter a binding contract.
Once an agreement on price, inclusions and terms is reached, a formal contract is drawn up to be signed. Have the contract reviewed by your business conveyancer prior to signing to ensure it accurately reflects your interests and the agreement between the parties.
It is highly recommended that you seek professional legal & financial advice when considering buying a business.