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In the United States, corporations and individuals buy and sell hundreds of thousands of businesses every year. Small local operations expand and partner to form larger organizations, and big corporations constantly subsidize smaller companies. The process is almost never entirely straightforward, and the buyers may wind up in a money pit without the proper experience. A knowledgeable New York business purchase and sale attorney will also make an enormous difference in the outcomes of these transactions.
It is absolutely critical to understand a transaction and its risks before committing. Some companies sell solely for their assets. In a complete purchase, the buyer absorbs the entire purchased company, including its assets, properties, and other tangible resources, but he or she also receives its debts, liabilities, and any potential tax ramifications as a result of the purchase.
RISK VS. REWARD
Growth by acquisition is an attractive concept for many businesses, but it is easy to overlook potential risks. Buyers must beware anything that could potentially delay operations, including:
Securing and managing financing. It is absolutely critical to compare the cost of borrowing with the possible return on investment. If the potential revenue outweighs upfront financing, the leverage gained from financing becomes a huge asset. Conversely, there is a risk of losing the business entirely should it not live up to earnings potential.
Obtaining any permits or licenses the purchased business requires. The buyer must beware what is essential to operate the company and how the parent company needs to adapt to accommodate the new acquisition.
Integrating the business. The buyer may decide to completely overhaul the management structure of the purchased company. In relationship-driven industries, it may be critical to retain managers and their network of contacts and clients. Adjusting branding may be a difficult choice as well. An established brand image is invaluable to an enterprise, and altering it may have drastic consequences.
Resolving potential liabilities. Sellers are usually diligent in exposing any undocumented liabilities to reduce the risk of non-disclosure based litigation in the future. Buyers must scrutinize and carefully address these issues.
Calculating the assets. If a buyer acquires a manufacturing facility, he or she probably wants to know if the machinery needs an upgrade or heavy maintenance in the near future. Securing a new lease for the acquired company’s grounds and facilities may also be necessary. Buyers must be extremely careful and confident that they know exactly what they are purchasing.
DUE DILIGENCE IS CRUCIAL
The purchaser should understand every possible facet of what he or she buys. The due diligence of obtaining this information and evaluating it will likely reveal the deciding factors in whether or not the sale happens. Having the right professional assistance will make a world of difference in an acquisition, and it can help the buyer evaluate his or her decision with expert advice.
An experienced business purchase lawyer in New York will help a buyer understand the records, account information, lease agreements, and other documents critical to the company’ profitability. The seller should be able to vouch for the accuracy of all the company’s internal documents, as any non-disclosure on his or her part will leave him or her open to future lawsuits. An experienced business lawyer in New York is an invaluable asset for either side.
Buying and selling companies can be precarious for even the savviest business people. Without the proper diligence and assessment of the potential risks, transferring ownership of a company can potentially become a nightmare. Faan Law Firm understands the potential snares of business purchases and sales in New York. Our team can assist buyers or sellers in their ventures with experienced, expert legal support. Contact us today for more information.