{"id":4824,"date":"2020-10-14T11:30:14","date_gmt":"2020-10-14T09:30:14","guid":{"rendered":"https:\/\/blog.startups.ch\/en\/?p=4824"},"modified":"2020-11-02T09:10:46","modified_gmt":"2020-11-02T08:10:46","slug":"due-diligence-when-purchasing-a-company","status":"publish","type":"post","link":"https:\/\/blog.startups.ch\/en\/due-diligence-when-purchasing-a-company\/","title":{"rendered":"Due diligence when purchasing a company"},"content":{"rendered":"\n

As a test drive and reviewing a vehicle\u2019s paperwork part of the process of purchasing a vehicle, due diligence is required in the course of purchasing a company. This is the terminology for the detailed review by the potential buyer of a company that is up for sale. We will explain to you, which areas of a company must be inspected during an acquisition.<\/h2>\n\n\n\n
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What is due diligence?<\/strong><\/h3>\n\n\n\n

Following contact between the buyer and the seller,\ninitial documentation for valuation of the company is prepared in the analysis\nphase, on the basis of which the buyer decides whether or not he will submit a\nnon-binding purchase offer (letter of intent). Due diligence is then conducted\n\u2013 the detailed review of a company being sold by the potential buyer. It\ndetermines if sales negotiations will be continued and has a major impact on\nthe details, such as price and any other terms of the sale.<\/p>\n\n\n\n

The scope of due diligence varies depending\non the type and size of the company. In principle, however, we can say that the\nlarger a company is, the more areas must be scrutinised, which is why involving\nexperts, such as fiduciaries, tax experts or attorneys is highly recommended.\nThe total scope of due diligence is divided into the legal, financial, and\nbusiness due diligence.<\/p>\n\n\n\n

Legal due diligence                                                           <\/strong><\/h3>\n\n\n\n

In this subsection, legal deficiencies and risks in\nthe company to be acquired are searched for specifically. In addition to\nongoing or impending legal disputes, disputes that have been settled, which\ncould have far reaching consequences, are also analysed. The analysed\ncircumstances typically fall in the areas of corporate law, labour law or\nantitrust law. Because the benefit and risk of the company are transferred to\nthe new buyer upon acquisition, he must be aware of potential risks. As a\nsubsection of legal due diligence, tax due diligence is likewise a substantial\naspect, which helps in the process in uncovering tax risks or opportunities\n(for example, for tax optimisation). Involving an experienced attorney and\/or\ntax expert is highly recommended here due to the required expertise. <\/p>\n\n\n\n

Financial due diligence <\/strong><\/h3>\n\n\n\n

Financial due diligence is conducted to find out more\nabout the financial conditions of the company to be acquired. If the company to\nbe acquired involves a small or medium-sized business, which is not normally\nlisted on the stock exchange and thus has no clear price, the results of\nfinancial due diligence are also particularly influential for purchase price\nnegotiations. In addition to the seller, the financing bank also has a great\ninterest in a diligent examination because for them the knowledge about\nfinancial opportunities and risks are crucial for granting the loan. For this\nreason, the bank should also be involved \u2013 at least in the question regarding\nwhat key figures they need with respect to financial due diligence.<\/p>\n\n\n\n

The financial conditions of the last three to five\nfiscal years of the company are analysed. In light of the asset investment, revenue\ngenerating assets, and financial investments, as well as current corporate\nplanning, a prognosis regarding future revenues is developed. In particular,\nthe financial and debt situation, expenditure and earnings, cash flow and\nsolvency is audited and forecast. Involving an experienced auditor is\nrecommended for this.<\/p>\n\n\n\n

Business due diligence<\/strong><\/h3>\n\n\n\n

Business due diligence is conducted to be able to better assess the\ncompany value, thus facilitating contract negotiations for the purchase of a\ncompany. The company to be acquired and its positioning on the market is\nthoroughly scrutinised in the process. A market analysis is recommended here \u2013\nproduct design and pricing policy, customer and supplier relations,\ntechnologies, the competitive situation, as well as the business model require\na thorough analysis.<\/p>\n\n\n\n

The scope of business due diligence can vary however. While buyers are usually already well aware of the business processes in the course of family-run succession solution or a management buyout, thorough business due diligence is essential when selling to a third party. However, we can generally say that the larger a company is, the more important it is. Information material is most often provided by the seller for this. However, one should not solely rely on this and independently form an image, for the seller will always disclose everything. Involving an expert is recommended in this case as well due to the potentially complex matter.<\/p>\n\n\n\n

Do you have any innovative business idea you would like to make come true? Use STARTUPS.CH experts to become self-employed. <\/p>\n\n\n\n\u00bb Finances<\/a>\u00bb Found online<\/a>\n","protected":false},"excerpt":{"rendered":"

As a test drive and reviewing a vehicle\u2019s paperwork part of the process of purchasing a vehicle, due diligence is required in the course of purchasing a company. This is the terminology for the detailed review by the potential buyer of a company that is up for sale. We will explain to you, which areas […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[287],"tags":[],"jetpack_publicize_connections":[],"aioseo_notices":[],"views":957,"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p54Pb1-1fO","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/posts\/4824"}],"collection":[{"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/comments?post=4824"}],"version-history":[{"count":3,"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/posts\/4824\/revisions"}],"predecessor-version":[{"id":5146,"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/posts\/4824\/revisions\/5146"}],"wp:attachment":[{"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/media?parent=4824"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/categories?post=4824"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/tags?post=4824"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}