A successful business purchase is about doing your homework up front and making sure you are well prepared.
In business circles this is called ‘doing your due diligence'.
Due diligence is not just for corporate players buying blue chip, listed companies – it’s just as important in the small and mid-cap business market.
Why do I need to undertake due diligence?
Buying a business is one of the most significant investments you will make in your lifetime.
If you were considering buying a business and there was an identifiable risk of a negative event occurring within that business, such as:
- loss of key staff
- loss of key supplier or customer relationships
- default on payments
- legal claims
- market slumps
… wouldn’t you want to know?
Due diligence allows you to recognise those risks before you commit to purchasing, so you can minimise the risk of a negative event impacting your financial strength and wellbeing.
What do I need to consider?
The JPAbusiness team regularly prepares custom due diligence checklists for clients looking to purchase businesses.
As part of this process we focus on three main areas:
- Commercial due diligence
- Financial due diligence
- Legal due diligence
The following infographic highlights the key issues that should be investigated as part of your due diligence on a business purchase opportunity.
Our advice is to engage professional assistance to support you in conducting due diligence on an acquisition opportunity – this will ensure a robust assessment of the things that matter to ensure your pending investment has the best chance of success.
If you would like support conducting due diligence on a business purchase opportunity, contact the JPAbusiness team for an obligation-free consultation.
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James Price has over 30 years' experience in providing strategic, commercial and financial advice to Australian and international business clients. James' blogs provide business advice for aspiring and current small to mid-sized business owners, operators and managers.