VIDEO: Business Insights - Buying a Business
In this video, Senior Partner Jessica Diep provides an overview of the key issues you need to consider when buying a business, and why having the right team behind you makes all the difference.
Buying a Business? Here’s how a lawyer can protect your interests!
Are you thinking about buying a business?
Buying an already established business can have definite advantages.
Businesses with a sound history that have been operating for a while are likely to have good systems and procedures already in place, a solid customer base and existing goodwill. It can also be easier to get financial backing from banks for these businesses.
However, an established business can also come with DISADVANTAGES, such as outstanding contracts that you will have to address, a poor public image, or high debtor days.
Doing your research to ensure that you are making the right decision when purchasing a business is ESSENTIAL.
Fortunately, one of the most effective ways to minimise your risk is to appoint an experienced commercial lawyer to act on your behalf.
Together with your financial adviser, your lawyer can advise you on the quality of the business you are looking at purchasing, as well as representing you in any negotiations if you decide to go ahead.
Doing the Research
When you are looking at purchasing a business, you need to gather as much information as possible about the business prior to the purchase.
We have worked with hundreds of clients in this area and can help you find answers to questions such as:
- Why is the business for sale?
- What is included in the sale? (Goodwill, premises, customers etc)
- What is the current business plan?
- What is the equity in the brand name?
- How is the business perceived within the marketplace?
- Who are its competitors?
As well as the preliminary research I have just mentioned, we can also help you with the formal process of DUE DILIGENCE.
Due diligence is the process of reviewing ALL of the information available on the business to highlight any issues that need to be addressed prior to the purchase, and to identify any potential problems with the business or risks.
Some of the information that we look at during due diligence include:
- Financial records and bank statements
- Taxation status
- Assets and liabilities and any third party security interests
- Compliance with any relevant laws and regulations
- Leases associated with the business
- Employment contracts and leave entitlements of staff
- Bonuses and commissions payable
- Intellectual property arrangements
- Restraint of trade issues
- Confidentiality issues
- Various contracts and terms of business
Negotiating the Deal
Based on the information we discover in the due diligence process we can then help you to assess the value and attractiveness of the business.
If you decide that you would like to go ahead with the purchase of the business, the next important step is to have the contract reviewed by your lawyer and negotiate any special terms or amendments.
Remember, when we review a contract on your behalf we will be looking for anything that might create an unreasonable risk for you as the purchaser.
We also look at ways to protect you moving forward.
- Do you require any non-compete obligations or restraints against poaching employees or customers?
- Do you require a period of assistance before or after you take over the business?
- Do you want to negotiate any changes to the existing lease?
These sorts of issues need to be finalised and spelled out in the contract BEFORE you sign anything and we have lots of experience in negotiating and finalising deals that work for our clients.
Every business is different and every purchase is different.
The most important thing is to gather a team that you can trust, an experienced lawyer and an expert financial adviser, who can guide you through the process and look after your best interests along the way.
If you are looking to buy a business, Maclarens is here to protect your interests – so contact me today and I can discuss this with you in more detail.