legal clique
5 tips to avoid common mistakes made
when buying a business.
3) WHAT IS ACTUALLY
BEING PURCHASED
It is critical that a buyer clarifies
exactly what is being purchased.
Things like intellectual property,
business contracts, licences,
employees are all components
that a buyer might expect to
receive in a business purchase.
In terms of employees, one of
the risks is that a key person will
transfer for a period of time, and
then leave and take many key
clients with them. Identify who
the key people in the business
are and ensure that they sign an
employment contract containing
an enforceable restraint. It is
equally as important that any
warranties given by the seller are
clear and enforceable.
4) PROPERTY MATTERS
Often a buyer will take an
assignment of the lease for
the premises. Review the lease
carefully, and make enquiries
as to whether or not the use of
the premises is lawful under the
town planning scheme. Consider
the make-good obligations under
the lease. The buyer may in fact
be left with a very expensive
make-good lease obligation
which requires reinstatement
of the premises to base building
condition. This should be
something that is carefully
considered when deciding on the
purchase price being offered.
5) PARTNER UP
If there are multiple buyers
going into business together,
it is important to ensure that
agreements are in place for
mechanisms on how to resolve
disputes, exit strategies and
for future succession planning.
What will be the structure? Is
a partnership or shareholder’s
agreement required? Key person
insurance and life insurance are
also relevant considerations. It
is often the case that people only
consider these issues when times
get tough, and unfortunately
in many cases by this stage it
can be like a marriage break-
down and a very complicated
and expensive relationship to
dissolve.
AUTHOR
Nicole Treacey, Senior Associate
MACPHERSON KELLEY
CONTACT
+61 732 350 430
WEBSITE
mk.com.au
This is not intended to be an exhaustive list, and seeking advice will be the key to success.
Financial and legal advisors will be able to help navigate the process. Buyers should
ensure they give their advisors clear instructions and as much information as possible.
The more due diligence conducted on a business, the more chance the acquisition will be a
success rather than a costly life lesson!
Women’s Network Magazine
35