Buying an existing business can be a fantastic way to expand your market share or acquire new technology, but it’s the buyer’s responsibility to ensure that the purchase is worthwhile. Before finalizing the sale, you and your business acquisition law attorney should conduct due diligence and investigate every aspect of the target company. Below are just some of the areas you should examine when considering buying another company.

A Guide to Due Diligence Before Acquiring a Business

Financial Records

Due diligence should focus on the company’s finances, particularly its profit statements and accounting methods. This step may require the expertise of an accountant who has the expertise to review the business’s profit-loss statements, balance sheets, and revenue projections. Asking to see the rate of return for each product or service will also help determine whether there is room to increase the profitability of the company.

Legal Status

Once the sale has gone through, you will likely be responsible for any pending litigation or liability issues, so have your business acquisition law attorney carefully review legal records before formally committing to any agreements. Your lawyer should review public records for lawsuits, as well as all contracts, leases, and other legal obligations. Finally, check any patents or trademarks to ensure that the intellectual property of the company has been fully protected.

Operational Concerns

Reviewing the daily operations of the business will help you estimate the company’s actual profit potential and gain more insight into its value. Ask to see data on customer patterns, especially the proportion of new customers to returning clients, and the rate of return on marketing programs. This step may also include a general market research study and regional industry trends to determine how the business is performing compared to its competitors.

From their offices in New Haven, Zangari Cohn Cuthbertson Duhl & Grello P.C. has provided sophisticated business acquisition law solutions to business owners throughout Connecticut since 1946. If you’re planning on acquiring a business, their attorneys will provide the legal guidance you need to make an informed decision. Visit their website for more information on their business acquisition law services or call (203) 789-­0001 to schedule a consultation today.