The most significant advantages of buying companies is the continuity of relationships with the clients and customers of those companies' and the benefit of the ongoing cash flow. The changes to the ownership in the background do not necessarily impact on the direct business-customer relationship. In a lot of cases there may be no need to amend or alter the existing contracts enjoyed by the sale company. In addition any desirable locations occupied by the company in question in most cases will not require any input from the Landlords as part of the sale. Note typically in shopping centres leases there is sometime a proviso for “change of control” requiring Landlord's consent.
The purchase of a company involves at least two strands of investigation, the accounting due diligence and the legal due diligence. Accountants will investigate the exchanged books of account of the Company to identify any tax issues that might arise e.g . historic VAT liabilities, non payment/ under declaration of taxes etc. Accounting due diligence should also confirm the tax liabilities facing the Company as against its cash flow in the current trading environment so that the future costs can be considered against the purchase price.
At the same time legal due diligence involves an investigation of the following:-
- A review leases & title that the Company holds.
- Credit Agreements & Hire Purchase contracts.
- Any issues arising with the standard business contract used by the Company.
- Compliance with the applicable legislation, standards, codes of practice and regulations affecting the business.
- Investigation of matters in the Licensing Office, if applicable and a review of the licensing file.
- Investigation into IP rights, proper company ownership and checks in Registries that trade marks, patents and designs are properly and duly registered. If not registered advices on the risks.
- Compliance with on-line trading regulations & Data Protection issues must be checked.
- A review and report of all employee contracts, rights acquired to the employee and options for redundancies for possible re-organisation.
- A review of the operation of the Company’s Pension (if any) for the benefit of its employees to ensure that it is in compliance with the necessary regulations and legislation.
- A review of the IT set up, the software operated and used under Licence, confirmation that all domain names are owned by the company in sale or are transferred as part of the transaction.
These proper investigations should may throw up serious issues which could affect the value of the Company in sale. It is reckless to consider purchasing any business without the conduct of a proper review. Individuals who are buying companies without proper scrutiny are guaranteeing problems and loss of investment after completion, regardless of whatever assurances have been given by the person selling. In numerous cases we are involved with the Purchaser has been exposed to considerable unforeseen costs or loss with little possibility to pursue the Vendor. The maxim of “buyer beware” is firmly enshrined in Irish Law and this applies in the commercial context also.
If you are in the process of buying companies or considering buying a business, contact for a free consultation to discuss your proposal from the start. As always our rates rates are competitive and charges transparent and we will discuss the fees with you at the outset.