Introduction
Prior to buying a business or company (“the Business”), the buyer should conduct due diligence, which involves careful investigation and consideration of the Business. It is possible to uncover hidden risks and opportunities through due diligence.
Uncovering Any Gremlins!
The buyer or its advisers will review contracts, licences, accounts, processes and systems of the Business in order to ensure that it obtains enough information and possibly uncover any gremlins.
If you are buying a Business, it is purchased on the basis of ‘caveat emptor’ (let the buyer beware). That is, the principle that the buyer alone is responsible for checking the quality and suitability of the Business before a purchase is made.
The seller is under no obligation to disclose anything to the buyer so if no due diligence is undertaken and no warranties given in the agreement, the buyer may be adopting a significant risk.
A due diligence procedure will investigate the company thoroughly and consider things such as: assets and liabilities, current and potential litigation, client agreements, insurance claims, employment terms etc.
Due diligence is a vital safeguard for buyers. It helps to minimise risk, helps to confirm the valuation/price is accurate, identifies opportunities and demonstrates a responsible approach to stakeholders.
If you are buying a Business and need legal support, feel free to get in touch.
In case you were not aware, Claric can also act on behalf of both the buyer and the seller during a specific transaction.
To learn more about the services we provide, visit https://www.clariclegal.co.uk/university-contracts or contact Richard Jenkins on 024 7698 0613 or richard@clariclegal.co.uk.
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