There is no way to eliminate all risks in business transactions, especially when purchasing, but conducting due diligence can at least reduce the level of risk. There are certain preparatory steps that you can take on your own, but it’s always advisable to have legal guidance behind you.
Here are some of the due diligence tasks that a lawyer can help you with when buying a business.
Does the company have outstanding debts?
Sellers tend to want to give the best possible impression of the company. They want to assure you that you’ll be making the right decision in choosing to invest. Unfortunately, some sellers use deceptive tactics. For example, they may hide or play down the level of debt that the business owes.
Through due diligence, you can uncover the exact financial circumstances of the company, including debts owed. A good lawyer will leave no stone unturned and they will also be familiar with the most common tactics used to conceal debts.
What is the structure of the business?
It’s important that you invest in a company that fits in with the culture you want to promote. In legal terms, this means taking a look at the current ownership and employees. When buying a business, the deal may include keeping on the employees. You may also not be buying a 100% stake in the company, so you’re going to want to know about other investors and shareholders.
A lawyer can help you get to the bottom of the structure of the company and the best way to move forward. This includes advising you on how to back away from the deal if it is unfeasible. Buying a business without first conducting due diligence is simply not worth the risk. We help investors with their transactions. Feel free to contact us for a consultation to learn more.