Protecting Your Interest as Purchaser
Due diligence is a process undertaken by a prospective purchaser of a business to identify:
1. The financial performance of the business;
2. The legal rights and obligations attaching to the business; and
3. The risks associated with the business.
It is important that purchasers “do their homework” to ensure they ascertain exactly what they are paying for.
Protecting Your Interest as Vendor
A purchaser would prefer to conduct due diligence prior to agreeing to purchase the business. However, a vendor would prefer to have a written commitment from the purchaser. Therefore the bargaining positions of the parties will influence the time in which due diligence is conducted.
Vendors should ensure that any prospective purchaser signs a confidentiality agreement when inspecting or taking copies of documents, especially in absence of a formal signed contract, to protect themselves from misuse of information or any prospective purchaser setting up a competing business using the “trade secrets” acquired from the vendor.
If you have any questions regarding the sale or purchase of a business or the protection
of your intellectual property, you should contact our Commercial Law specialists at
Commercial, Trusts, Estate Planning & Superannuation Group
Phone: 02 9806 7471