What Due Diligence To Do When Buying A Business


The main purpose behind carrying out due diligence when buying a business is to ensure no unexpected problems or nasty surprises occur or that there are no unforeseen liabilities attached to the purchase of the business. In assessing what due diligence to do when buying a business, it should be borne in mind that although the process is designed to ensure that the buyer is protected, it is essential that both the buyer and seller understand the steps involved.

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For a free initial discussion on how we can help you buy a business, get in touch with us today. We will review your situation and discuss the process involved in a clear and approachable manner. Early expert legal assistance can help you avoid making mistakes, saving you money and also avoiding the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or complete our online enquiry form and a member of the team will get back to you.

What Are The First Steps In Carrying Out Your Due Diligence?

The first thing to remember is that your due diligence really needs to start long before you arrange to view the business and meet up with the current owner. You need to set out your budget and ensure at an early stage that these figures are actually realistic for the industry and particular business you might be interested in. Identify the location of the business that meets your criteria and try and gather as much information regarding your chosen business as possible (including why the current owner is selling) and think carefully about why you are looking to buy.

Just because it is your dream to buy, for example, a florist in a particular town, it doesn’t necessarily mean it is a viable business. Check the competition and try and assess the level of demand.

If everything seems to check out, draw up a list of a few viable businesses that are for sale to see how they compare with each other.

What Other Things Do You Need To Consider?

Finances – To gain a fuller understanding of where the business stands at the moment and what the potential for future growth is, it is essential to gather all the available financial data about the company. This should include information available at Companies House such as up to date accounts, annual returns, and company reports. Additionally, profit and loss statements, debt information and accounts for any subsidiary companies that are owned by the business are essential.

Growth Potential – Where is this business going? Is it in a shrinking sector or is it poised to expand with the right level of investment and correct management? What are the opportunities for the business and for the sector as a whole? What are the sociological, economic, technological or political forces that will affect the business? It is important to analyse the performance of the business along with its profits to better understand the factors that underpin its value.

Business Operations  You will need access to all information relating to the operational functioning and management of the company. You really need to drill down the finer points wherever possible. Remember, operations is the engine room of a business so your understanding of how it functions is essential. This information will include staffing and employment policies, company procedures, company hierarchy (a departmental “family tree” is useful), details of customers and suppliers, current contracts the business is tied into (e.g. renting premises or equipment) and various types of insurance that is in place.

Prevailing Economic Conditions – When analysing the viability of the business you are looking to buy, having an appreciation of the prices other businesses in the sector have been bought and sold for will give you valuable insight into what sort of figure the business might be worth. Additionally, keeping abreast of the level of transactions in the sector will help you establish any trends or perceived stability.

How we can help

We have a proven track record of dealing with business purchase. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact our Corporate Solicitors

It is important for you to be well informed about the issues and obstacles you are facing. However, expert legal support is crucial in terms of reducing risk, saving you money and ensuring you achieve a positive outcome.

To speak to our Corporate solicitors today, simply call us on 0345 901 0445, or allow a member of the team to get back to you by filling in our online enquiry form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

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