Once you have found a business that you would like to buy, it is important to conduct a thorough, objective investigation. The due diligence process involves a slew of documents and checklists that should be met in order to acquire a business. Cervitude Intelligent Relations guides clients through the acquisition process of public and private companies. The following list includes important information you want to include when researching or purchasing a potential business:
- Letter of Intent: The letter of intent should spell out the proposed price, the terms of the purchase and the conditions for the sale of the business.
- Confidentiality Agreement: A confidentiality agreement indicates that you will not use the information about the seller’s business for any purpose other than making the decision to buy it.
- Contracts and Leases: If the business has a current lease for the location, be aware that you may have to work with the landlord to assume any existing lease on the business premises or negotiate a new lease.
- Financial Statements: Examine the financial statements from the business for at least the past three to five years. Also make sure that an audit letter accompanies the statements from a reputable CPA firm. You should not accept a simple financial review by the business itself.
- Tax Returns: Review the business’s tax returns from the past three to five years. This will help you determine the profitability of the business as well as any outstanding tax liability.
- Important Documents: Numerous documents should be checked during your investigation. Examples include property documents, customer lists, sales records, advertising materials, employee and manager information and contracts.
- Professional Help: A qualified attorney should be enlisted to help review the legal and organizational documents of the business you are planning to purchase. Also, an accountant can help with a thorough evaluation of the financial condition of the business. We can help find these professionals and recruit them for your project.
- Sales Agreement for Buying a Business: The sales agreement is the key document to finalize the purchase of the business. This agreement defines everything that you intend to purchase including business assets, customer lists, intellectual property and goodwill. If you do not have a lawyer to help you draft the terms of the sale, you should at least have one review the agreement before you sign it.
Once you have agreed to buy the business, it is time for the closing. A Checklist for Closing On a Business can be found at the before mentioned link. If you need assistance acquiring a business, buying a franchise or purchasing another corporation, partnership or limited liability company; Cervitude IR consultants can help. Contact us today: