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Due diligence in business acquisitions

Due diligence is a vital process that you need to go through to check the financial position and viability of a business you are proposing to buy. It is also something that should be done when awarding contracts or agreeing to extend credit facilities.   

Due diligence allows you to examine a business’ records and to ask questions about financial performance, assets and liabilities, current activities and work in the pipeline so that you can determine credit worthiness, commercial potential and overall viability.

It is not a process that focuses solely on accounts; it also considers business structure, organisation and performance of the current management team, employee numbers and personnel matters, terms and conditions of trading, supplier contracts and other key legal documents.

The due diligence process explained

nik-macmillan-280300-unsplash-copyIn the context of a business acquisition, carrying out due diligence enables you to determine whether the proposed purchase price is fair and realistic and whether there are any areas of concern that require further consideration or investigation before the sale proceeds.

It is vital that due diligence is conducted thoroughly, and in this handy guide, the DBA’s legal partner Humphries Kirk LLP explains the correct process. 

DBA members can download the ‘Due diligence in business acquisitions’ guide here

Legal advice helpline: Free advice for DBA members

DBA members benefit from a free half hour of legal advice on any number of differing issues from the DBA’s legal partner Humphries Kirk. Please contact Darrell Stuart Smith at Humphries Kirk on 01305 251007, stating that you are a DBA member.

Not yet a DBA member?

If you’re not yet a DBA member and would like to benefit from the DBA’s legal helpline, as well as a wide range of other membership services and events, visit our website or call 020 7251 9229 to speak to our Head of Services. 

Image credits: 

Photo by Nik MacMillan on Unsplash

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