BUSINESS PURCHASE: DUE DILIGENCE
Business Purchase - Letter of Intent - Due Diligence - Negotiations - Asset vs Share - Purchase Agreement - Closing
Contact Neufeld Legal PC at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com
When seeking to acquire an operating business, it is imperative that the appropriate due diligence investigation is undertaken. The appearance of a great acquisition target may not be as it would have initially appeared, either being overvalued or not being worth pursuing. As such, it is imperative that the requisite investigatory searches and reviews are completed prior to proceeding further, including:
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Legal Due Diligence - the investigation of the target company's legal status, compliance, and potential liabilities. As such, legal due diligence seeks to verify the seller's representations and warranties, identify hidden risks, and ensure there are no legal obstacles to the transaction. This process is essential for making an informed decision about whether to proceed with the acquisition and, if so, at what price and on what terms.
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Financial Due Diligence - a detailed examination of a target company's financial records to verify the accuracy of the information provided by the seller. The goal is to identify potential risks, uncover liabilities, and confirm the business's financial health, performance, and value before the transaction closes. It's a critical step that goes beyond a simple review of financial statements to provide a true picture of the company's economic reality, which is used in conjunction with the other areas of due diligence, including legal due diligence, to assess the viability of the target business and those concerns that need to be addressed prior to completing the proposed transaction.
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Operational Due Diligence - a deep-dive investigatory analysis into the non-financial aspects of a target company. Unlike financial due diligence, which focuses on numbers, operational due diligence examines how the business operates on a day-to-day basis to assess its health, efficiency, scalability, and risks. The goal is to verify that the business is as functional as the seller claims and to identify any potential problems or opportunities that may not be apparent from the financial statements alone.
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Commercial Due Diligence - involves a comprehensive investigation and analysis of a target business' market, customers, and competitive environment to assess its long-term viability and growth potential. Commercial due diligence looks forward, aiming to validate the business's strategic value and the assumptions behind its business plan.
Comprehending the results of your due diligence investigations plays an equal, if not greater role, than the information that is revealed from the investigation, as it is this analysis that provides you with an assessment of the appropriate purchase price and any additional modifications or alterations required to the proposed business transaction. Your ability to effectively negotiate the correct terms of the business merger or acquisition shall be dictated by those results, making this process pivotal to the final outcome of the deal.
Our experienced corporate legal team is primarily focused on the legal aspects of the due diligence process, although we are also attuned to those other aspects of due diligence in the context of a corporate merger or acquisition, as they invariably have an an impact on the legal aspects of the particular transaction and are highly consequential to whether or not the project deal is completed and at what price. These aspects can become highly interwoven and cannot be overlooked, given the long-term financial ramifications of an incomplete or an inadequate due diligence process.
For knowledgeable and experienced legal representation when purchasing a business, contact corporate business acquisition lawyer Christopher Neufeld at Chris@NeufeldLegal.com or 403-400-4092 / 905-616-8864.
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Purpose of a Share Purchase Agreement. A Share Purchase Agreement is a legally binding contract that outlines the terms and conditions for the sale and transfer of shares in a corporation from its current shareholders (the Vendor) to the Purchaser. The functional purpose of a Share Purchase Agreement includes . . . Read more. |
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10 Key Aspects of an Asset Purchase Agreement. An Asset Purchase Agreement is the contractual document between the purchaser and the vendor that sets out the legal terms and conditions of the transaction of purchase and sale of specific assets of a corporation or business. The following represents 10 key aspects of consideration . . . Read more. |
