What due diligence should I perform before buying a business?

It is essential to conduct due diligence when buying a business to ensure you are aware of any potential liabilities, legal issues, or other considerations related to the specific business you are acquiring. Consulting with your lawyer and your accountant is highly recommended to make an informed decision based on your unique circumstances.

Before buying a business, you should focus on the financial, legal, and operational aspects of the business you wish to purchase. You will want to ensure that you can receive a clear title to any assets and/or shares. It is important to examine the company’s financial statements, tax records, and outstanding debts. You will also want to review all relevant contracts, corporate records, and potential legal disputes. You should also assess operational efficiency and the workforce and investigate customer relationships, market positioning, and competitive landscape. You should analyze supplier contracts and potential supply chain risks. If applicable, conduct environmental and property assessments, and ensure intellectual property ownership is clear, if applicable. Examine employee contracts, potential severance obligations, and compliance with labor regulations. If premises are leased, review the vendor’s lease obligations and the right of the vendor to assign the lease to you.

You should also verify the business’s compliance with any industry-specific regulations, licenses, and permits. You may also wish to seek customer feedback and references. Another step you should consider is to evaluate the technology infrastructure and IT systems. Review future financial projections and the business’s legal ownership and structure. You should confirm the transferability of supplier agreements and licenses to ensure you are getting the benefit of the business you are purchasing. We recommend engaging professionals for expert assistance and insights throughout the process, including lawyers and accountants. Thorough due diligence is essential to make an informed and secure business acquisition.