Due Diligence When Buying A Business

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Etienne Lawyers assist you in preparing for or to undertake a due diligence exercise to sell or buy a business

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Due Diligence When Buying A Business

  1. 1. Due Diligence When Buying a Business Presenter: Steve Brown www.etiennelaw.com
  2. 2. Overview  What is due diligence?  What is the purpose behind due diligence?  Who Conducts due diligence?  What is the due diligence process?  Where is information obtained?  Lessons from the cases. www.etiennelaw.com
  3. 3. What is due diligence? Due Diligence is: Detective work; Doing your homework; Over coming unforeseen and unwanted issues after acquiring a business www.etiennelaw.com
  4. 4. Purpose behind due diligence?  To minimise risk  The more informed a purchaser is the more chance the purchaser has to not loose money www.etiennelaw.com
  5. 5. Purpose behind due diligence?  Confirm what the  Investigate the state of business is; management of the business;  Confirm that the soundness of any  Confirm the status of company to find pending lawsuits; and contingent liabilities;  Identify the extent and  Avoid quantum of contingent misunderstandings as liabilities to the type and condition of the business being bought; www.etiennelaw.com
  6. 6. Purpose behind due diligence?  Essentiallygain information that will be useful for  valuing assets,  defining representations and warranties, and/or  negotiating price concessions; www.etiennelaw.com
  7. 7. Who conducts due diligence?  Due Diligence Committee  Comprised of purchaser  Purchasers lawyer  Purchasers accountant  Purchasers financier  Others that are need as required by the transaction www.etiennelaw.com
  8. 8. What is the due diligence process? Preliminary Form DDC Investigation DD Undertakes of C’ttee Detective Target work Use Results to negotiate Due Diligence Purchase Obtain Process terms Target to acquire Acquire Target knowing all that is to be known Given the time and money the Purchaser has/wants To spent www.etiennelaw.com
  9. 9. Where is information obtained?  From the target, data room, employees on-site investigations  From the purchaser’s own knowledge  From industry bodies  From trade magazines  From consultants  From customers, clients and suppliers www.etiennelaw.com
  10. 10. Lessons from the cases….  Have a due diligence agreement Plessey Components Pty Ltd v Cant  Determine what is proper due diligence objective or subjective test SDS Corporation Ltd v Pasdonnay Pty Ltd & Anor  Minimise disruptions to target SDS Corporation Ltd v Pasdonnay Pty Ltd & Anor  Get a clear understanding between the parties Hayle Holdings Pty Ltd v Australian Technology Group Ltd [2000] FCA 1242 www.etiennelaw.com
  11. 11. Questions? www.etiennelaw.com

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