Most purchasers will conduct due diligence before they acquire a business. Although the temptation to find out anything and everything about the target business is great, that will come at a financial and non-financial cost.
The risk of having too much information is that a purchaser may be on notice in relation to anything that has been disclosed, not to mention the added time and cost associated with conducting the due diligence. However, that must be carefully weighed against the risk of not getting information that may be important to a purchaser. From the seller’s perspective, being weighed down by too many requests for information may create unnecessary burden on resources or be disruptive to the business.
It is therefore important to have a well thought out due diligence process from both parties’ perspective to minimise impact on the target business.
As a purchaser, you should try to influence the due diligence process by planning ahead by considering the following:
- your appetite for risk – for example, is there a monetary limit as to the types of contracts or issues you wish to know about
- your key assumptions in relation to the success of the business, and
- your concerns in relation to what might affect the success of the business.
Once these considerations are known, you should be in a good position to know where to focus on when conducting due diligence.
Aspect Legal can assist with preparing due diligence plans, and in the due diligence process. Just contact us on 02 8006 0830 or send an email through to us, and we will be in touch for a free discussion.
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