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Buying and Selling of a Business

Selling and or buying a business involves several important steps to ensure a smooth handover to a new owner – which steps include conducting a proper due diligence, preparing enforceable contracts, risk management and contract review, negotiations, delivery and settlement implementation.

Usually the first step is due diligence. Due diligence is the process of investigating the business and its operations to give you more information about what you are purchasing. A business lawyer can assist during the due diligence phase of a business purchase.  

 

Due Diligence  

 

A proper due diligence will not only ensure you do not pay too much (as you would have a good idea of the business’s value once properly done), but also significantly reduces your financial and legal risks.   A due diligence investigation will differ from business to business, but will most likely include the following:  

 

  1. a financial analysis of the business and its value;
  2. identifying and valuation of any intellectual property;
  3. assessment of any immediate or future legal and/or financial risk to the business;
  4. a determination of existence of any legal impediment to the transaction, making the transaction impossible i.e. such as terms in shareholder agreement prohibiting the sale ;
  5. a determination of the formal and company secretarial requirements necessary to implement the agreement;
  6. a determination of whether the business operates in a sound and lawful manner, complying with all relevant legislation.

Negotiate  

 

Generally, the seller will prepare the sale agreement and send it off to the purchaser to review. The purchaser will with the guidance of his business attorney, suggest amendments where needed and try to push back on sticky issues and negotiate more favourable terms. This is where a professional business attorney shows real value, by guiding his client on what to push back on and which terms are rather standard.  A less experienced attorney may get stuck on an issue which really should not be a sticking point, which could potentially lead an increase of legal fees and even the deal to lead to dead end.  

 

Closing  

 

We advise on all aspects of buying and selling and our experience extends to both buyer and seller interests. It is extremely important to lay the proper foundations prior to signing any business sale agreement, so as to avoid any costly litigation in the future.  

 

If you have any questions, give us a call at 021 9488 273 info@oreillylaw.co.za   #acquisitions #disposals #business #sme #growth #valueextraction #exit #strategy