Top 5 Questions Purchasers have when Buying a Business

On 31 August 2023 our Director, Amanda Crosbie and Senior Associate Solicitor, Hamish Taylor hosted a live LinkedIn Q&A answering the Top 5 Questions Purchasers have when Buying a Business.

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Should I buy the shares or buy the assets?

  • Depends on the situation, the client and the type of business that is being purchased.
  • Typically, a purchaser will prefer to buy the assets over shares.
  • Purchasing shares means you also have to take on potential liabilities.

What legal entity should I use to buy the business?

  • Depends on the business, and your person situation and growth goals.
  • Both your Lawyer and Accountant should be involved to ensure the proposed structure is in both your legal and financial best interest.
  • Tax minimisation strategies, asset protection and commercial considerations should be made when deciding.
  • The decision should be made prior to the Sale Agreement being executed.

What is the process to buy a business?

We generally become involved once the purchaser has found a business to buy.

  1. Preliminary discussions.
  2. Heads of Agreement – setting out the key aspects of the purchase.
  3. Due Diligence.
  4. Purchase Agreement – legally binding document outlining what happens before, during and after settlement and completion.

What types of due diligence should I undertake?

  • Doing research on the business you would like to purchase, consider the risks, and weigh up the pros and cons of purchasing.
  • Helps you determine if, and how you proceed with the purchase.

Types of due diligence:

  • Commercial due diligence.
  • Accounting / financial due diligence.
  • Legal due diligence.

What happens to the existing employees?

  • Sale of shares, nothing legal needs to occur.
  • Sale of assets, more complex:
    • Purchaser decides whether or not they want to keep the current employees of the business.
    • Employment entitlements are negotiated in the sale of business contract.

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The information in this article is not legal advice and is intended to provide commentary and general information only. It should not be relied upon or used as a definitive or complete statement of the relevant law. You should obtain formal legal advice specific to your particular circumstance. Liability limited by a scheme approved under Professional Standards Legislation.

Senior Associate Solicitor