Buying a Business – Due Diligence Specifics

Financial due diligence – check up on balance sheet major items such as the last full audit, was it over six months ago. If so do another one. Stock levels rising may be a dangerous sign, especially in manufacturing, fashion or seasonal industries. In addition look at size of the bad debts.

If allowed appropriate access to the business consider doing an employee audit, looking at who the key employees are, so you can plan how to run the business paying in mind who if anyone is leaving with the vendor. Compare the skill levels, the level of employee turnover, and the levels of pay with the average. Also ask, estimate and project how employees will feel about a change of ownership. Would you expect any to leave and if so would the right people stay and can you get rid of those who you do not want.

When it comes to employment issues there are many legal factors to consider. Lawdit can help with these.

Legal due diligence – might also involve confirming the state of legal and equitable ownership of assets. Assets such as property, equipment, vehicles, intellectual property. Particularly if you are dealing with intellectual property you need to be sure of the legal situation with regard to applications and renewals. Lawdit is very experienced in these matters and can help you to realise the most worth from intellectual property. Which the vendor may have overlooked.

Also check for past, current or pending legal proceedings and contractual obligations. Such as employment contracts including pensions, contracts with third parties, such as customers and suppliers. Look for liabilities contingent on these contracts and consider what effect a change of ownership will have. Some contracts may be nullified as a result are they the right ones, or would you be losing valuable assets which would need time reestablishing?

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