Purchasing a Business? The importance of Due Diligence
Purchasing a business can be a daunting task and also a huge risk, as many businesses appear healthy while huge liabilities wait to be uncovered.
Therefore it is essential that before reaching an agreement a thorough examination of the legal, commercial and financial aspects of the company to be purchased (or ‘target business’) are carried out so that an informed decision can be made.
This examination is referred to as ‘due diligence’ and is generally carried out by the purchaser’s accounting and legal advisors.
In any due diligence investigation, it is imperative that a thorough accounting review takes place led by an experienced financial advisor. This will involve reviewing audited accounts and future projections as well as examining the company’s tax affairs.
The accounting review will take place alongside an investigation into the target business’ legal obligations.
This will involve your legal advisor conducting a review of all employment contracts, distribution agreements and all other legal documentation pertaining to the company so that a full picture of the company’s rights and liabilities can be made.
Your legal advisor should also examine any property held in the target business’ name. These enquiries should be as stringent as if it were any property transaction, as in most cases it will be unsatisfactory to rely on any warranty given by the seller as part of the purchase agreement.
Due diligence is usually completed by way of a checklist by the purchasers’ legal advisors, made by compiling a ‘due diligence report’.
Compiling an extensive due diligence report is the most effective way to ensure that you have minimised your risk and maximised your chances of success when purchasing a new business, allowing you to make an informed decision before agreeing to the purchase.
Steen O'Reilly LLP Solicitors
Founded in 1911, we are a well-established legal firm based in Navan, Co. Meath with a valued reputation in all areas of law.
Steen O'Reilly LLP Solicitors
31 / 34 Trimgate Street
Navan, Co. Meath
Tel: 046 9076300
Email: solicitors@steenoreilly.ie
All Rights Reserved | Steen O'Reilly LLP Solicitors