So you’re considering buying a business? Buying a business from somebody else is likely to be one of the biggest financial transactions that you will ever undertake. It makes sense to invest time and money to ensure that you acquire an asset that lives up to your expectations.
Our role is to help you appreciate the issues and make an informed judgement as to whether or not to proceed. Having assisted clients in this situation previously, we would like you to benefit from our experience.The main drivers for a purchaser to conduct a due diligence review are:
- Assess potential risks, exposures (and opportunities);
- Identify and quantify potential significant (undisclosed) tax liabilities (realised and unrealised);
- Quantify tax attributes of the target (e.g. tax losses, capital losses, franking account balances) and determine the value of these attributes to the purchaser;
- Quantify any necessary dollar adjustment to the purchase price to allow for these factors;
- Conclude whether the business should be acquired.
The level of review required will depend upon the complexity of the purchase and the past transaction history or “baggage” that the purchaser assumes with the business.
A thorough due diligence review will be particularly important in cases where:
- A business entity is acquired that remains liable for the obligations and misdemeanours of its past;
- A purchaser enters into a joint venture or partnership which involves a dependency on third parties – to identify the partners’ risk profile;
- The business is heavily dependent on intellectual property rather than "bricks and mortar";
- The business engages in cross border activities – certainty will be required for both domestic and foreign tax exposures.
If you are considering buying a business it is important a thorough due diligence review has been carried out.
If you require assistance, please contact us on (02) 8264-0755
All representations and information on this site is general in nature and should not be relied upon as advice. If you require specific advice please contact us.