5 things you need to know about Buying a Business
- Buying a business is exciting. It can be a great way to either move into the business world for the first time, or to expand an existing business. It is, however, important to ensure that the purchase is conducted in a way which protects you as far as possible. Much like buying a car, you’ll only really find out what’s “under the hood” once you’re in ownership of the business.
- The first way to protect yourself, as purchaser, is to conduct a thorough due diligence of the business. This involves going over the financials with your accountant, interviewing employees, and of course completing a legal due diligence, which entails your lawyer reviewing all of the business’s important legal contracts.
- Once you’ve decided to purchase the business, the seller’s lawyer will draft up a sale of business agreement. Your lawyer will review the document, and work out firstly whether the agreement sets out the same deal as has been agreed. The second question is whether it protects your interests in the event that the business doesn’t generate as much revenue or profit post-sale as the seller has told you.
- If you purchase a business that depends on the owner/operator being heavily involved, you should insist on a training period. This is a period during which the seller will train you in all of the tasks necessary to operate the business. Training periods of up to a month are standard.
- Finally, make sure you work with an experienced business lawyer when purchasing a business. The process can be complex, and it’s important to ensure that you’re receiving advice that will protect you both during the sale process, and once you’ve taken control of the business.
Ursula Hogben Key Focus:
Commercial Law, Contract Law, Information Technology And Online Law, Intellectual Property, Capital Raising LawExperience:
Bank of America Merrill Lynch, Baker & McKenzie, Hogben Group