The pandemic has been a very difficult time for most businesses and while the latest set of restrictions have now largely been lifted in England and Wales, the financial impact of the last two years is likely to last for some time. In such difficult...
Anyone who is thinking of acquiring a business or a company, purchasing shares or assets needs to undertake an audit of the affairs and financial health of the target in question.
This investigative process is referred to as due diligence and it will identify any areas of risk. Potential investors are able to appraise the potential purchase and review important factors such as its contracts, expenses and any claims. It is about getting a full picture of how the target is run, its financial pressures and the state of the accounts.
The due diligence process usually starts following a deal being agreed. Initially, the potential buyer sends enquiries to the seller, which require a response. The enquiries can go backwards and forwards a number of times with additional information requested. During this phase, lawyers and accountants will get involved to support and advise their clients.
It is the opportunity to get any issues out in the open so the buyer is fully aware of the current status and any liabilities. It is vital to be honest in response to the enquiries as, ultimately, the information provided will create the warranties and indemnities – in other words, a guarantee – that the seller has disclosed everything which may affect the buyer once a transaction is completed.