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Machins Solicitors
Victoria Street
Luton
LU1 2BS
T: (01582) 514000
F: (01582) 535000
DX: 5924 Luton
1
enquiries@machins.co.uk
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Previous News
BUYING A BUSINESS?
Buying a business can be an extremely demanding and stressful time. In this article we will briefly touch upon some of the areas which you should consider before you buy an existing business.
We will be concentrating on the purchase of the assets of a business. The advantage is of proceeding in this way is that you can purchase those assets you require and leave unwanted debts and liabilities with the seller. You also benefit from the reputation of the business (if any) and some of the hard work in setting up the business has already been done for you.
- Due Diligence � This is the process by which you assess the business. It is crucial that you investigate the business fully. Due diligence does not just stop at the financial accounts. Ask questions about contracts, employees, property, suppliers, customer lists, any litigation or potential litigation which may affect the business and it's ongoing ability to provide income.
Enquires can reveal problems in the business which can be resolved before completion. If they cannot be resolved or if the seller is not prepared to deal with them, it may be a tool which you can use to renegotiate the purchase price.
- Employees - Existing employees are entitled to transfer across to the buyer and are generally are protected by the Transfer of Undertakings (Protection of Employment) Regulations 1981. This means it is often difficult to change existing terms. Check how many employees are coming to you and understand your liabilities going forward.
- Contracts � If there are ongoing contracts linked to the business this is inevitably where the majority of the value in a business lies. Check that these can be transferred to you and there are no provisions allowing major clients/suppliers to terminate.
- Intellectual Property � Copyright, Patents, Etc. Ensure the seller owns the intellectual property rights used in the business. It is not uncommon for such rights to be held by another party. These will need to be assigned across.
- Goodwill - This may vest in a variety of things including the business name, the customers and perhaps the location. Ensure that you are adequately protected in the sale agreement to avoid the seller from setting up in direct competition or poaching the customers of the business you are buying.
- Warranties - You can and should request assurances from the seller on key issues in the form of warranties. If any of these turn out to be untrue you will have the ability to sue for breach of warranty against the seller. This will afford you a degree of protection but it is no substitute from carrying out careful due diligence.
As you can see in this brief article there are numerous matters you should consider before investing into a business. Given the amount of time and money which is often invested into a business it would be false economy not to do your research.
If you are considering buying a business we would strongly advise you to get specific advice. For more information on this area then please contact Karyn Wong of Machins Solicitors on 01582 514000.
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