While a business sale may feel very close to finished once the buyer and seller have both signed a letter of intent to move forward in the final stages, there's still one more major hurdle to cross. This is known as due diligence, and it's an important process where all parties involved can make some final checks to ensure they aren't taken by surprise with any details of the deal.
At Utah Business Consultants, we'll happily walk any of our SLC or other Utah clients through the due diligence phase of your business sale, ensuring that all the i's are dotted and all the t's are crossed. In this two-part blog series, we'll discuss the various parts of the due diligence process and how to consider each while finalizing your business sale.
Product Line and Equipment Analysis
One of the key features of any due diligence process is the thorough analysis of a company's products, services and equipment. Buyers need to understand exactly what they are purchasing in terms of assets and potential future liabilities.
This isn’t just a physical inspection either; buyers will often want to review an itemized list of all current and discontinued products, services and equipment. They’ll also look for any potential intellectual property or patents related to the business.
It's very important that sellers provide accurate and up-to-date information during this process, as buyers could later claim damages if it turns out anything was misrepresented in the initial due diligence.
Copyrights or Trademarks
Another major element of due diligence is the confirmation of any copyrights or trademarks associated with the business being sold. The buyer should make sure they are legally able to use any existing logos, slogans and other branding materials associated with the company without fear of legal action from a third party.
There may also be some business sales where copyrights or trademarks do not transfer as part of the sale. In these cases, it's important to determine what will happen to these items and how they will be managed after the deal is complete.
Reviewing a company's financial records is another key component of due diligence. It's important for buyers to understand exactly where the company stands financially, as this can greatly affect their decision to purchase.
Buyers will look at financial statements, tax returns and other records to get a better handle on the company's cash flow and overall financial health. It's also important for buyers to understand any existing debt that may come along with the business sale as well as any long-term liabilities or commitments.
In part two of this series, we'll take an in-depth look at the remaining parts of due diligence. Be sure to check back for more information about how you can ensure your business sale goes as smoothly as possible.
At Utah Business Consultants, we have extensive experience helping clients with the due diligence process in SLC and throughout Utah. If you're looking to buy or sell a business, contact us today to learn how we can help.