Things to take care of during due diligence
Due diligence takes place when you are in the process of buying a business and need to sign a confidential agreement with the seller, and by this you assure him that without his approval you will not contact anyone for further information about the business. By prematurely announcing the sale of the business, the seller would put his important relationships with the suppliers and staff in danger. So when you start evaluating the business that is for sale, there are certain things given below that you need to consider:
Inventory: The inventory has all the items owned and for sale by the business. While you are evaluating the inventory, you should have your qualified representative with you in order to carefully verify what all is on hand, from how long does the company have it, and also check what all was there in the last year and before that. The valuation of the inventory is usually subject to negotiation and so your qualified representative must be well experienced and clearly understand the condition of the inventory, its stability and also what all items the seller is interested in selling.
Building, and fixtures and furniture: You will need to get a list of each piece of equipment and model no for the same from the seller. This will give you a clear idea about the value when it was purchased, the present value and also check whether it was leased or purchased. You also need to check how much the owner has invested in maintenance and keeping the equipments in good condition. While taking note of this, you also need to determine how much time, efforts and money you will need to put in order to modify the property and make it suitable for your needs.
All legal and contract documents copies: There are a wide range of legal copies like the purchase agreement, lease agreements, business employee agreements and things like these that your qualified legal advisor need to look at. You also need to consider the intellectual property like the trade secret, trade name and so on.
Tax returns: This is also a crucial thing that you need to look at while due diligence. You will need to make sure that you have access to at least the last 5 years of tax returns filed by the seller. Most of the business users make personal use from their business, and in this regard they take vacations, take gadgets and vehicles for personal use and charge it on their business, and so you need to really investigate it and then come to a conclusion and get a clear idea about the net worth of the company.
Liabilities list: Consider all the legal liabilities that the seller has, and also get a clear understanding about how much efforts and time is needed in getting things straight. The professionals helping you out in this regard should also lookout for the out of court settlements and employee benefit claims.
There are many other such intricate details that the buyers needs to lookout for before signing the due diligence and so it is best to take help from professionals like us and experience smooth and reliable services.