Purchasing a Business : Due Diligence
A successful business purchase starts with asking the right questions.
Due diligence when purchasing a business is one of the most fundamental parts of the process and can take from a few weeks to a few months, depending on the complexity of the business in question.
This is your only opportunity to delve deep into the financial, legal and operational workings to ensure that there are no surprises once the ink has dried.
Accessing Confidential Business Information
If you are looking to purchase a valuable, highly innovative or competitive market business, you may be required to sign a Non-disclosure Agreement (NDA) before reviewing sensitive commercial information. This document outlines the restrictions on the information you receive, should you not proceed with the purchase.
Understanding Your Obligations Under an NDA
When purchasing a business, there are many considerations that must be taken into account to ensure you have the full picture of the business you are buying. As we work through the due diligence, questions about the information we are reviewing may arise. In this case, a Request for Information will be put forward to the Vendor and their legal team, who will submit responses.
Key Areas of Due Diligence
What does due diligence look at when purchasing a business?
A simple google search; reviews may help you discover the public’s perception of the business.
Compliance: What licenses are needed to run the business? Are there certificates, and when do they expire? What are the industry regulations? Are there any Health & Safety requirements?
Physical Assets: Check all assets are in working order. Does the Vendor have a record of maintenance on any of the business assets? Request copies of any leases for equipment.
Employees: Gather a list of all employees, including positions, current salaries, salaries, and bonuses paid in the last few years, and the years the employees have been in service. Obtain resumes of any key employees.
If you’re purchasing stock as part of the business, read our blog to learn more about stock valuation.
Due diligence extends far beyond the examples we have noted above, and it is recommend and encouraged that you contact a knowledgeable and experienced lawyer before agreeing to, or signing any documentation.
Looking to buy a business?
Whether it's a small family-owned enterprise, an e-commerce business, or a professional practice, Sutcliffe Matson Law can help. Our experienced team advises clients on a wide variety of business transactions across multiple sectors.
Get in touch today and let us help you start your business journey on the right foot.
Breanna Fuller
Email: breanna@smlaw.net.nz
Phone: 09 279 8351 ext 212
Jasmine Pyke
Email: jasmine@smlaw.net.nz
Phone: 09 279 8351 ext 224
Honour Anderson
Email: honour@smlaw.net.nz
Phone: 09 279 8351 ext 207