How To Go Through Due Diligence When Buying A New Business

by Kyle Steven The Red Flag Group | Global Integrity& Compliance
What Is A Due Diligence?

Due Diligence is the complete assessment of business operations, finances, supply chain and through all other aspects before entering into a partnership, merger, or buying that business. It is a vital step that helps to protect both the parties involved from any further legal or financial complications, uncovering all the financial matters and potential liabilities, to ensure a transparent process.

Due Diligence When Buying A Business

When you are buying a business, you will be entitled to all the assets, operations, sales, services of the new business. This also means that you will also hold liable for all the irregularities, unpaid taxes and any other legal or financial anomalies related to that firm, which, in the first place, you would not want to face or associated with. This is where due diligence comes as an important step that helps you uncover all the aspects related to the functioning, partnerships of the business, helping you make an informed decision.

How To Carry Out Due Diligence Before Buying A Business?

  • Complete assessment of the company’s Article of Incorporation, along with the Bylaws, organizational chart, list of shareholders, executive committee, company properties, business locations, use permits, deeds, mortgages, title policies and copies of all other status reports.
  • Thorough evaluation of company financial information including financial statements for a certain time period, auditor’s reports, company’s credit report, capital budgets, analyst reports, accounts receivable & payable, fixed and variable expenses, gross margins, and all other related statements.
  • Assessment of physical assets, like leases of equipment, sales schedule, purchases of major capital equipment, and other possessions.
  • Assessment of intellectual property that includes domestic and foreign patents, patent applications, copyrights, trade names and trademarks, agreements related to inventions, licenses, patent clearance documents, and all the other related documents.
  • Full evaluation of government licenses, consents, permits and documents related to the proceedings of any regulatory agency.
  • Assessment of employees, including their positions, salaries and bonuses, employee benefits, agreements between the company and employees, retirement plans, holiday and sick leave policies, documents related to the history of worker’s compensation and unemployment insurance claims, and more such information.
  • Evaluation of all other significant aspects such as environmental audits, taxes, material contracts, product and service lines, customer information, insurance coverage, articles and publicity, litigations, supply chain risk management, and everything else related to the functioning of the company.

These are the necessary due diligence steps you need to take before buying out a business to ensure that you are entering in a reliable and transparent deal. You could seek a professional help from corporate due diligence services provider, which can help you in carrying out a detailed evaluation of the company strategically.

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About Kyle Steven Junior   The Red Flag Group | Global Integrity& Compliance

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Joined APSense since, August 30th, 2017, From Tempe, United States.

Created on Oct 6th 2017 00:47. Viewed 405 times.


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