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Conducting Due Diligence in Business Purchase Agreements

Buying a business is a complicated process, and often times, the business purchase agreements are presented by brokers and designed to protect the broker. Parties themselves must take great care in scrutinizing not just the transaction itself, but also the business purchase agreement. Starting with the big picture, parties need to look at the agreement itself to make sure it matches up with expectations. Parties should not “assume that the agreement is standard” or contains the basics.

Buyers should make the purchase contingent upon a careful investigation of all aspects of the business. Buyers need to think carefully about not just the financial records, assets, and monetary aspects, but other issues such as whether the seller is the actual owner, whether any liens or judgments exist, pending disputes and litigation, business licenses and transferability, compliance with ADA, and existence of warranties. All of these issues need to be investigated and properly addressed in the agreement if necessary.

The parties should also investigate all assets relating to the business. This includes all tangible property as well as intellectual property such as trademarks, trade secrets, business plans, customer/client lists, and domain names for any websites. Such assets should similarly be addressed in the agreement.Top SF Attorneys for Buying and Selling Businesses

The buyers will also want to pay attention to how the sale itself will proceed logistically. Transfers of some of the assets above may be simple, but sometimes additional agreements may be needed such as for an assignment agreement to transfer intellectual property. Other transfers, such as lease transfers, credit cards, or log-in information,  may be more complex.

These are only some of the numerous issues that come up in the purchase and sale of a business. Again, it is important that you conduct careful due diligence on all aspects of the business.


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