Unlike starting a new business, buying an existing business gives you the advantage of knowing exactly what you are acquiring. You will know the current financial position of the business, its profit opportunities, and its prospects. However, to acquire a thriving, established business, you may have to pay a high price. You will pay not only for the business assets but also for the concept of a successful business, its goodwill, and the customer base. Your goal as a buyer is to make informed decisions. An excellent attorney will help you close a business acquisition deal cost-effectively and efficiently, avoiding post-purchase litigation.
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Despite the best intentions of the buyer and the seller, disputes in a business acquisition process may arise. To avoid complications and to optimize the potential success of the transaction, take legal advice to understand your risks and potential. Consider utilizing the expertise of an attorney to avoid litigation in the future. Here’s how lawyers can help reduce the risks involved in buying a business.
The negotiations for a business acquisition deal begin with the valuation of the business. A specialist business valuer can help you determine the economic value of a business. Typically, valuers take into account a range of factors including the valuation of business assets, the net cash flow, and the profit or loss of the business after tax.
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When it comes to the legality of an acquisition, people often rely on the services of experienced lawyers. No matter how lucrative the deal is, it makes no sense to acquire a company that has existing legal issues. Attorney representation will help you understand and scrutinize the legal matters of the business you are planning to take over. Also, your lawyers will keep only your interests in mind when they inspect the Purchase Agreement.
The Purchase Agreement
The Purchase Agreement includes the terms and conditions of the purchase, binding them into a contract that covers all aspects of the deal. This includes the valuation of immovable and liquid assets, inventory, equipment, intellectual property rights, and goodwill. Lawyers reduce your risk by ensuring that the Purchase Agreement is accurate and in accordance with the Letter of Intent you provide when expressing an interest in making the purchase. A fully-evaluated Purchase Agreement protects you from future misunderstandings, misrepresentations, and financial disputes.
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Attorneys Conduct Due Diligence
Due diligence is the research carried out prior to entering into a financial deal or an agreement involving another party. In the case of mergers and acquisitions, the due diligence process is absolutely necessary to make a smart decision. Therefore, us an attorney to examine the company you intend to buy. They will assess its business entity, verifying whether it is operating within the state laws, and checking that all necessary permits and licenses are in place.
The due diligence activity also allows you to find out if the company is in violation of environmental and zoning regulations. You will learn if the business has been sued before, has paid penalties, or if it has legal judgments against its mode of operations. When precisely executed, due diligence serves to reduce your risk when entering into the business acquisition agreement.
If not done correctly and carefully, acquiring a business can be an expensive mistake. Therefore, to reduce your risks, engage a professional attorney with experience in business acquisition. They will help you make a profitable and smart investment.