How can I be sure that the business I buy is successful?

Overall you can't. That is why before entering into an agreement to buy a business it is essential to be fully aware of the financial viability of that business. We will therefore issue pre-contract due diligence enquiries to the seller of the business regarding the circumstances of the business. Your financial advisors will more than likely undertake financial due diligence. As a result of these responses, further negotiation as to the terms of the deal may be required.

It is important that the agreement for the purchase reflects all of the things the seller has told you about the business. In the agreement for the sale of the shares or assets there will be a collection of warranties that the seller will give to the buyer. These warranties are statements about the affairs of the business and are likely to cover taxation, accounting, finance, employees and liabilities amongst others. Should these warranties be false the buyer will have the right to sue the seller for any loss suffered as a result. The warranties will usually be subject to any content disclosed by the seller to the purchaser and various seller protection clauses included in the agreement.

There is only so much protection the transaction documents can offer. Though they can provide information about the financial viability of the business and can also offer the possibility of taking some action should the business fail, they cannot be used to guarantee the new business will be a success. For this reason, the investigation of the business and the negotiating process becomes of paramount importance.

A member of our specialist Business Law team can provide assistance throughout the investigation of a business process.

For more information please call our Business Law Solicitors on freephone 0800 975 2463 or contact us by email


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11 Dec 2018



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