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What Kind Of Due Diligence Do You Do For Your Business Clients Who Are Considering A Merger Or Acquisition?
At SG Law Group, we invest our time in your success. Part of our process is thorough due diligence. We review and research several areas to ensure your merger or acquisition goes as smoothly as possible.
First, we will review the financials of the business. We want to make sure that everything is in order. One advantage of hiring SG Law Group is that the Managing Attorney, Senen Garcia, is also an Accountant. Senen reviews the company’s financials to ensure they’re in order.
Next, if we represent the buyer, we enquire with the other party. We want to talk to the seller about any issues with seller’s clients and get their affirmation that there are no current problems. We want to learn from the seller if they are honest about what’s going on with the business. Suppose the seller isn’t honest, and later, something comes about. The Seller’s misrepresentation may be the cause of problems that you could lead to significant damages if a proper due diligence is performed.
If we represent the seller, we need to be sure the buyer the financial capabilities to consummate this deal and, in some cases, have the requisite knowledge to manage this business following the sale in the case a portion of the funds will be paid via a seller financed loan.
We want to run through how the business functions and will ask the seller:
- Are there any pitfalls?
- Do you have any compliance problems in terms of how you function?
- Have you had any OSHA violations?
- Do you currently have all your required insurance(s) coverages?
If you have already seen how they operate and it’s questionable, we will want to put waivers in place. That way, if anything were to happen, the seller would be responsible for it.
If you’re taking over a lease, we want to look through the lease to verify information such as:
- Is the lease transferable?
- Is the landlord going to be okay with transferring this lease?
The last thing you want to do is buy a location and not be able to take over the lease. Then you’d be stuck on the street with all the equipment you just bought.
We also want to make sure that what you’re buying is with clear title. If any of the equipment that’s transferring is encumbered, such as a lien or a loan. If that’s the case, we want the seller to pay off the liens on that equipment or otherwise clear title. Sometimes, the seller will refuse to pay off the equipment. If that’s the case, we make sure that whomever the creditor is of that equipment, it is okay with the buyer taking over that equipment and the loan, as well as look for price concessions.
The general framework when purchasing any asset are:
- By purchasing the asset(s)
- By purchasing stock/ownership interest of the company
An asset purchase is when a buyer agrees to purchase specific assets of a business without the liabilities. Additionally, from a buyer’s perspective, we want to ensure that whatever assets we’re buying and any items we’re taking over have as little liability as possible.
With a stock purchase, there’s a little bit more legwork involved. In a stock purchase, a buyer is assuming liability. Our main focus is to reduce the amount of unknown liability as much as possible. Suppose we’re representing a seller in the case of an acquisition deal. In this case, it’s a bit different because we only need to do the compliance portion and verify that the buyer has the funds or the financial capabilities to complete the deal.
With the guidance of a skilled Mergers & Acquisitions Law attorney, you can have the peace of mind that comes with knowing that we’ll make it look easy. For more information on Business Mergers and Acquisitions in Florida, an initial consultation is your next best step. Get the information and legal answers you seek by calling (305) 606-6139 | (305) 285-3042 today.