BUYING & SELLING A BUSINESS
We strongly suggest that you speak to us in the early stages of buying, selling, merging or restructuring your business for the following reasons:
- we can assist with the preparation of a ‘Heads of Agreement’ so that you can lock in a binding agreement on key the terms;
- we can assist with due diligence for both vendors (to ensure your ‘house is in order’ and you maximise your sale price) and purchasers (to ensure you know exactly what you are buying and you pay a fair price for it);
- we can assist you in your negotiations; and
- we can help you navigate through the regulatory and banking requirements so that your transaction is not bottlenecked.
BUYING A BUSINESS
There are a large number of possible pitfalls when it comes to buying a business and/or taking out a lease of commercial premises.
Some of the critical issues to consider when buying a business include:
- Checking the terms of the lease of premises that comes with the business.
- Ensuring that you have an entitlement to receive adequate training to be able to take over the business as smoothly as possible.
- That all equipment and stock to be sold with the business is properly itemised and that any charges over such items are discharged and removed upon settlement.
- That any staff remaining with the business are properly identified and receive any accrued entitlements from the current business owner prior to settlement.
- Determining the adequate level of protection against competition from the current business owner, so that the goodwill of the business is not eroded post-settlement.
OTHER CONSIDERATIONS
Lease – Both within the context of buying a business and simply taking over new business premises, it will be important to ensure that the lease to be entered into contains fair and reasonable terms.
Contracts – Does the business have any key contracts with customers or suppliers? These will need to be reviewed to ensure they are enforceable and do not contain any unfavourable hidden provisions.
Stock – Does the transaction include stock? If so, the contract will need to outline a stock take process.
Plants & Equipment – Is there any plant and equipment the subject of the sale? If so it might be necessary to obtain valuations of that plant and equipment and warranties from the vendor regarding its condition.
Employees – Details will need to be provided by the vendor about all current employees so you can negotiate with the vendor as to whether some or all of those employees will be offered extended employment and a decision then needs to be made whether you, as the purchaser, will be retaining all, some or none of those employees. Do any of these employees have written employment contracts? We can advise you on the Fair Work legislative requirements for transferring staff.
Financial Statements – We can work with you and your accountant to review financial statements for the business if required.
Finance – If your purchase is being financed by a bank we can manage the bank’s requirements regarding due diligence and contract documentation.
Transitional Assistance – Depending on the nature of the business it might be the case that the purchaser needs some transitional handover assistance. If so we will ensure this is negotiated and agreed with the vendor and properly documented.
Restraint on the Vendor – A common issue facing purchasers of businesses is to protect the goodwill of the business that they have just paid for by restraining the vendor from setting up a competing business for a period of time. We can guide you through the legalities of these restraint of trade concepts to ensure that a mutually agreeable position is negotiated.
BUYING & SELLING A BUSINESS
DUE DILIGENCE
DUE DILIGENCE
People always talk about ‘due diligence’ but you might wonder how relevant it is to what extent it applies when you are looking to buy a business. Let us assure you that it is relevant to all business purchases and sales and those who avoid it, or who fail to give it credit, do so at their own risk.
Due diligence is not something that should be overlooked when buying a business or selling a business.
Due diligence is relevant to both vendors and purchasers and is not something that happens overnight. If you are a vendor you should take time to review and coordinate your business affairs so you can be sure that the business is compliant, organised and complete. Once you open your business up for investigation by potential purchasers they will be looking for holes and, if they find any, it will be reflected in the purchase price or you could lose a deal altogether.
On the other hand, if you are the purchaser it is normal practice to give yourself adequate time to conduct your due diligence so that you (and generally your financiers) are satisfied that the business you are buying is what the vendors represent it to be, is compliant and is fairly priced.
The scope and extent of due diligence typically includes a review of:
- corporate structure and governance documents;
- regulatory licences;
- permits and approvals;
- material contracts;
- employment records;
- asset condition reports;
- finance agreements;
- commercial leases and real property documents;
- active litigation;
- insurance document;
- public searches of corporate data; and
- intellectual property.
Liberty Lawyers has undertaken due diligence on many M&A transactions and firmly believe that it pays to have an experienced legal team on your side to ensure this process is as targeted, streamlined and efficient as possible, and most importantly, identifies any concerns.
LOOKING TO BUY OR SELL BUSINESS?
Arrange a consultation with Liberty Lawyers today