When it comes to buying or selling a business or franchise, we at Fred Kalouche & Associates have two words for you: due diligence. As with buying or selling property, the difference between doing your homework and not can have a huge impact on the final outcome.
Take it from our expert business and commercial lawyers, it pays to do things properly, and that’s where we come in. Our lawyers are skilled in sales, purchases and mergers and can prepare for, negotiate, manage and complete the transaction no matter the business industry.
Factors to consider include:
- The nature of the industry within which the business operates;
- Statutory and other regulatory requirements;
- The size and location of the business;
- The nature of operations;
- The asset classes;
- The employment operations and industrial relations environment;
- The extend to which the business utilises the land; and
- The relevance of intellectual property to the business.
When contacted in the early stages of buying, selling, merging or restructuring your business, we can help prepare a Heads of Agreement to lock in a binding, documented agreement, as well as the all-important due diligence process. Reviewing and coordinating your business affairs benefits both the vendor, to ensure issues with the sale will arise, and the purchaser, who will need to know the business is compliant and fairly priced. Fred Kalouche & Associates can advise you on business structuring and asset protection; negotiations; and navigating regulatory and banking requirements to keep the process as streamlined as possible.
The scope of due diligence typically includes a review of:
- Corporate structure and governance documents;
- Regulatory licenses;
- Permits and approvals;
- Material contracts;
- Employment records;
- Asset condition reports;
- Finance agreements;
- Commercial leases and real property documents;
- Active litigation;
- Insurance documents;
- Public searches of corporate data; and
- Intellectual property.
The same due diligence applies when you are buying a business that leases existing premises and intend to transfer said lease. It’s important to review the lease terms, such as the rent review process, termination rights, works clauses, indemnities and lease term options, to ensure they are favourable to you and vary them, or, if need be, negotiate a new lease. We can handle this review for you, by negotiating with the owner, as part of obtaining consent. Note that while the vendor might have a relationship with the property owner, they have no incentive to improve the lease position purely because they are about to sell to you.
You must also obtain all necessary licenses, authorisations and permits required to legally conduct business at the premises. Our lawyers will check the validity and adequacy of these licenses held by the vendor, but you may need to seek additional authorisations if the law or policy has changed. In many cases, licenses are not transferable, so you will need to go through a new application process, which we can assist you with in a timely manner.
Other considerations that go into buying or selling a business include:
- Contracts – Does the business have any key contracts with customers or suppliers, which will need to be reviewed?
- Plant and Equipment – If plant and equipment is the subject of the sale, warranties will need to be sought regarding its condition.
- Employees – Seek details of all current employees, including written employment contracts, so that you may negotiate their retention with the vendor. We can advise on Fair Work legislative requirements.
- Financial Statements – We can work with you and your accountant to review financial statements for the business, if required.
- Finance – if a bank is financing your purchase, we can handle the bank’s requirements.
- Transitional Assistance – The purchaser may need some transitional handover assistance, which we can help negotiate and properly document.
- Restraint on the Vendor – You can restrain the vendor from setting up a competing business for a period of time. We can help you reach a mutually agreeable position on this.
Finally, to maximise your asset protection, as well as to assist in taxation planning, we can advise on the best business structure to purchase your business trust, such as through companies or discretionary units. Help avoid disputes by arranging a shareholder, unit holder or partnership agreement to ensure both you and the vendor are on the same page.
When buying or selling a business, the devil is in the details. Talk to us as your first port of call (02) 8062 6300