DUE DILIGENCE

DUE DILIGENCE

During the process of selling a business, Due Diligence can be one of the most stressful points.  Therefore, if you are looking into the consideration of acquiring a company or business, it is crucial that you, as the interested buyer, make sure that all the facts about the business are easily accessed and have been officially and properly verified.  This is applicable if the purchase is by either shares or assets, though the former is where it is of greater importance to exercise due diligence.  This is because when you purchase a company’s shares, you also buy into their liabilities.

UNDERSTANDING DUE DILIGENCE

Due Diligence was originally and primarily used in banking and is best explained as being the process of thoroughly enquiring before any time and money are invested in a prospective acquisition.  It is crucial, therefore, when investing significantly in a company, that all necessary checks have been made to ensure that the information provided by the individual selling a company is accurate. If you are interested in purchasing a particular business, there is legal, financial and accounting due diligence you should carry out.  While accounting and financial diligence involve the consideration of tax issues, cash flow statements, balance sheets and similar things; legal due diligence involves: 

  • Identifying the seller and their ownership.
  • That the seller provides details of any threatened or existing court proceedings.
  • Determining if the company has any pension schemes and if the current employer is contributing to it. If there isn’t one already in place, it could be a good idea to establish one.

Advice for Due Diligence

Along with the above, there are also important considerations that should be made regarding commercial properties that are owned by the company you are interested in.  Furthermore, the health and safety policy, environmental record and intellectual property of a company should be considered.  Accountancy Solutions can help you with all aspects of due diligence involved in the purchase of a company or business; so contact us today for more information. 

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