When assisting clients with buying or selling a business, the initial challenge is the process of “due diligence,” requiring a deep dive into the company being sold. Parties are usually surprised at the time and effort necessary for the investigation, and there is usually more to undertake once the purchase agreement is prepared. The work, though, can uncover issues that were not apparent earlier.
While attorneys help guide the process, understanding the information that will be examined and what items might need attention will help the seller be more prepared and assist an efficient review by the potential buyer.
- Financial information: income and cash flow statements, profit and loss statements, balance sheets, accounts payable and receivable, tax returns, profits itemized by each product or service, analyses of profit margins and expenses, and a valuation of the assets and the business as an ongoing operation.
- Tangible and intangible assets: inventory of the company’s physical holdings and other assets, such as intellectual property and real estate.
- Business structure and operation: corporate organization, analyzing how the business operates, locations, products and services offered, marketing, industry trends, competitors of the business, customers, and branding.
- Contracts: contracts the seller made with others that will be included in the sale.
- Customer information: sales records, subscriber lists, marketing programs, customer research, and purchase and refund policies.
- Employee information: list of employees and titles, employee and contractor agreements, benefit plans, payroll data, and human resources policies, which will help make employment decisions moving forward.
- Legal liabilities: lawsuits or other legal issues, such as licenses and permits, import/export laws, labor disputes, zoning laws, environmental regulations, and issues that could lead to disputes down the road, and insurance coverages for these matters.
Due diligence should be undertaken with assistance from legal, tax, and financial professionals who have experience with business acquisitions. Our attorneys can help perform due diligence, negotiate a purchase price, safeguard against unanticipated liabilities, handle contract assignments, and properly structure and document the purchase. To schedule a meeting, please contact us at 248.477.6300.