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Due Value

Reading time: 1 - 2 minutes

Due diligence. Whats it actually mean?

In short, due diligence is an investigation.

And when it comes to buying a business, a proper due diligence process makes sure you get value for money.

But thinking about this is equally important for a seller to consider, so they get value for their efforts.

Whilst its very difficult to check every single aspect of a business, there are some key ones that warrant consideration;

Employees

There are often key workers. Ensuring they stay or at least that their knowledge is adequately captured and passed on is a must.

Customers

Agreements with key customers need to be looked at carefully. Understanding what is being provided to them and on what terms can avoid losing them to the competition.

Intellectual Property

One of a business most valuable assets. Making sure it is properly owned, identified and transferred is vital.

Premises and Leases

The lease on premises is particularly important where position is pivotal. Lawful use of the premises for what the business does is too. A short remaining lease period can be problematic for both buyer and seller.

Suppliers

What do they supply and what are the expected trading terms? Make sure you know, because without the goods the customers will walk.

Licences and Permits

 Some industries require specific authorisation to operate, otherwise they are legally precluded. Its up to a buyer to check this out, along with what can be transferred and what has to be applied for from scratch.

At the end of the day, the buyer will need to be comfortable that they're getting value for money. It might cost a few thousand dollars to have an accountant assist with the process, but are you prepared to risk a few hundred thousand dollars otherwise?

My advice? Don't scrimp on good advice.

If you need some professional help with proper due diligence process, get in contact with us.

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