Reading time: 3 minutes

When an individual or a company wants to buy someone else’s business, it will want to know everything about the business before payment is made. The due diligence process is the process where the purchaser and its team of advisers (if it has one) undertake a comprehensive review of relevant material disclosed by the vendor to investigate the operations, assets, liabilities, value, potential, and risks of the business.

Why do I need to do it?

The due diligence process is beneficial for both the purchaser and vendor.

The due diligence process will enable the purchaser to:

  • accumulate sufficient information to validate the valuation of the business and justify its reasons for buying the business;
  • learn more about the business and its operations;
  • identify any problems and liabilities that the business has;
  • identify any material risks that it will inherit once the business is purchased, whether they be commercial, legal, tax or otherwise, and to seek to mitigate those risks, including via warranty and indemnity protection under the sale documentation; and
  • identify the capacity and potential of the business.

The vendor will want to cooperate in providing the due diligence material to provide the purchaser with information and help shield it from any future claims. If risks and liabilities have been properly disclosed, the purchaser cannot make claims against the vendor in the future for not knowing.

How is the due diligence process conducted?

Several years ago, the due diligence process would be conducted in a physical room. The vendor would provide all its information in hard copy in a room, and its lawyer would sit in that room and supervise while the purchaser and its lawyers went through the documents.

Nowadays many companies use an electronic data room as an electronic space to host due diligence material. An electronic data room allows parties to access due diligence material simultaneously, online, without having to visit a physical room to review the documents. As an administrator of the data room, you can set rules around who can view and who can download documents, and track access to documents, without a person having to be there to look after a physical data room.


For what you need to consider when making information available in the due diligence process – stay tuned for Part 2. Until then, if you need assistance with buying a new business, such as a franchise, and need assistance to carry out due diligence, contact LegalVision on 1300 544 755.



Employment Essentials for Tech Businesses

Thursday 5 May | 11:00 - 11:45am

Protect your tech business and your employees by understanding your employment legal obligations. Register for our free webinar today.
Register Now

How to Protect and Enforce Your Trade Mark

Wednesday 11 May | 11:00 - 11:45am

Protect your business’ brand from copycats and competitors. Register for this free webinar to learn how.
Register Now

Corporate Governance 101: Responsibilities for New Directors

Friday 13 May | 11:00 - 11:45am

If you are a new company director, join our free webinar to understand your legal compliance obligations. Register today.
Register Now

How Franchisors Can Avoid Misleading and Deceptive Conduct

Wednesday 18 May | 11:00 - 11:45am

Ensure your franchise is not accused of misleading and deceptive conduct. Register for our free webinar today.
Register Now

New Kid on the Blockchain: Understanding the Proposed Laws for Crypto, NFT and Blockchain Projects

Wednesday 25 May | 10:00 - 10:45am

If you operate in the crypto space, ensure you understand the Federal Government’s proposed licensing and regulation changes. Register today for our free webinar.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

Day in Court: What Happens When Your Business Goes to Court

Thursday 2 June | 11:00 - 11:45am

If your business is going to court, then you need to understand the process. Our free webinar will explain.
Register Now

How to Manage a Construction Dispute

Thursday 9 June | 11:00 - 11:45am

Protect your construction firm from disputes. To understand how, join our free webinar.
Register Now

Startup Financing: Venture Debt 101

Thursday 23 June | 11:00 - 11:45am

Learn how venture debt can help take your startup to the next level. Register for our free webinar today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer