Due Diligence
Due diligence is a verification process of the information provided by the vendor and helps provides confidence in your purchase decision when buying a business. Regardless of whether you are a large, medium, or small entity it is vital to complete due diligence before purchasing a business.
Partner with a chartered accountant
Partnering with our chartered accountants to undertake your due diligence will help you determine key financial, commercial, and operational factors, identify risks, and assess the true value of the business.
Our business advisors will step you through the process and enable you to proceed with confidence, amend the deal to mitigate risks or recommend walking away from unsuitable deals.
What are the benefits of due diligence when buying a business?
Due diligence provides a holistic view of the business, considering the inherent value of the company, other bidder activity, potential synergies, and your capacity to fund the acquisition. You want to acquire the business at the right price; based on a comprehensive understanding of its existing obligations, financial health, and strategic positioning.
• An understanding of revenue and earnings drivers
• Gauging the level of risk involved in the transaction and potential ways to mitigate
• Discovering the business’s obligations, both known and unknown, and the impact on future performance and cashflows
• Unearthing any issues with the deal early to either reassess, modify and proceed, or walk away
• Determining the level of gearing that the business can withstand
• Providing potential buyers with comfort and assurances of the deal
• Helps to reduce business disruption and ensure smooth transfer to new owners
• Can aid in securing a higher price for your business
• Assists in managing the timing and process of the sale
The best for you and your business
Required Information for Due Diligence
When you first look at a business basic information will be supplied. However, in some cases the owner of the business will be reluctant to reveal too much about the business until an offer is made. Many aspects in the operation of a business are commercially sensitive and confidential, thus a business owner would be prudent in withholding until there is a serious intention to purchase or conditional offer subject to due diligence.
Due diligence involves analysing all the below information to form a holistic view of the value and risk of the prospective business.
• FINANCIALS – three to five years of tax returns, BAS, records of account receivables and payable, balance sheets, profit and loss records, cash flow statements and sales records. How is the business performing? What are its outgoings? Does the business have any outstanding debts?
• LEASE – How long is the lease? Will the landlord agree to the transfer of the lease into your name? Will you have to negotiate a new lease?
• RENT – How much is the rent and other associated outgoings?
• STAFF – how many employees? And what are the current employee’s outstanding entitlements?
• LICENCES AND PERMITS – does the business have all correct and up-to-date licences and permits required to run the business?
• LEGAL DOCUMENTS – are there outstanding agreements between the seller and suppliers?
• ASSETS – what assets does the business have? Does it have any intellectual property?
• INVENTORY – how is the inventory managed and stored? Will inventory on hand be included in the purchase price?
• Status of plant, equipment and fixtures – What kind of equipment and machinery does the business own? Are they in good working order and licenced?
• ROI – what will be your return on investment?
• PRICE – Is the business within your budget and can you fund the purchase?
• LOCATION – Is the business suitable to you and is it a good area for this type of business? (demographics)
• TENURE – How long has the business been operating?
• What are the ‘barriers to entry’ in other words how difficult would it be for a competitor to set up a similar business?
three to five years of tax returns, BAS, records of account receivables and payable, balance sheets, profit and loss records, cash flow statements and sales records. How is the business performing? What are its outgoings? Does the business have any outstanding debts?
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“Partnering with Pitcher Partners for the business strategy and development has been the right decision from the start. Their passion and dedication for our business growth is invaluable. They handled our business just like their own and provided us with complete business services from streamlining operations to financial strategy and management. Highly recommended!”
– Pitcher Partners Newcastle and Hunter Client