Page 10 - Moore Blatch Business Magazine edition 2

CORPORATE

So, I’ve bought a ‘low mileage’
second hand car from the dealership,
reassured that its one careful lady
owner took loving care of it prior to
my purchase. Now the advertisement
didn’t say the lady owner was careful…
but she must have been, right?

PETER JEFFER Y
PETER JEFFER Y
P artner, corporate
023 8071 8040
peter.jeffery@mooreblatch.com

DUE DILIGENCE
Buying a business is essentially no different to buying that second hand
car. You wouldn’t part with your cash without checking the important
details. You’d want to be sure you were buying what you wanted and
expected, at a price you’re comfortable with.

Running such checks when buying a business is called due diligence –
basically an audit of its business, legal and financial affairs. You should
use due diligence to ask about issues such as intellectual property
rights, material contracts, employees and property.

Due diligence isn’t a substitute for a properly written contract.
However, it helps you assess the business, decide what warranties
you want from the seller, what liabilities you’re prepared to take on
and whether you agree with the price or even want to proceed.

WHA T IF Y OU’RE SELLING?
The second hand car I bought was probably spruced up before it was
sold. Any scratches or marks were removed, the car given a wash and
polish, and the interior cleaned up.
If the IP rights are still owned by a third party, does your business
Taking the same care when you’re selling your business will help you have a licence to use them and is it in writing? If not, what are the
secure a quicker sale for a better price. You should be able to give terms of the arrangement?
positive answers to all the questions below. After all, a shiny car is
more appealing than a dirty one! ARE CONTRA CTS WITH CUSTOMERS
AND SUPPLIERS CRUCIAL TO Y OUR
BUSINESS?
WHA T’S A T THE HEART Which ones and are they in writing? If not, what are the terms and
OF Y OUR BUSINESS? does the contract depend on your relationship with the supplier
Your buyer will want to be sure your sale includes everything your or customer?
business relies on. If it’s intellectual property rights, who owns those
rights? You or a third party? Can you prove your business owns them Some contracts require the other party’s consent if you’re selling
– either because they were developed by employees or the third shares. When you’re selling your business, you may need the other
party transferred all rights to you? party to agree the contract can be moved to the buyer.

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