Georgia Business Acquisitions Business Checklist
Buying a business is a critical decision which you should approach with caution and due diligence to ensure that you are well informed in your purchase. A wrong decision will cost you great financial pain and emotional suffering whereas the right purchase will be a feather in your cap for many years to come. Below you will find some of the steps you will want to consider both in buying or selling a business.
- A good attorney is the best protection (along with following their advice of course) to help ensure that you evaluate, consider, and document all important/critical factors in making your decision. As the purchase itself is the culmination of your due diligence, you will want an attorney to draft the actual purchase agreement to ensure that all needed critical components of your decision are well documented and agreed to. Your acquisition agreement should also document to whom the total purchase price is to be allocated, as this will be important for both tax planning and to prepare your tax return at year-end.
- For proper due diligence on the company's financial condition, I suggest that we get at least two years of financial statements and tax returns, a year to date financial statement for the year including the balance sheet and the profit and loss, a copy of all material leases that you plan to assume, a non-compete on the prior owners and any key employees, and a list of all fixed assets and their fair market value that you will be buying, a detailed list of all inventory at cost, a list of open receivables, and a list of open payables.
- You will want to determine what specific procedures were done to evaluate the integrity of the financial statements (i.e., consultations with their major vendors, customers, an evaluation of checks written being sure that all checks are valid business expenses and have been properly recorded, consultations with their banker, their prior CPA, an evaluation of their overall books and records and internal controls, and tracing several months detailed deposits to the bank statements along with reconciling the total bank deposits for the year to the financial). Also I would suggest getting copies of detailed payroll records for employees and independent contractors so that you are aware of the staffing needs/requirements and those monetary considerations. A good CPA can help evaluate these in detail looking at trends, the market, and other demographic data, and any undue/excessive concentration of business & clients, technology etc., to ensure you are fully aware of what you are buying.
- If an acquisition also includes the of buying real estate as part of the total purchase, you will want to determine fair market value by having an independent appraisal performed.
The above is a good list to get started and then to see where these answers/questions take you. Please note however, there is no substitute for the facts and intuitiveness that a good CPA/financial adviser can bring to the table to evaluate buying a business and its purchase/sales price.
We frequently assist purchasers in evaluating not just the financial aspects of a purchase but also in evaluating many critical components, which might otherwise be missed. By retaining our firm you will gain a comprehensive view of the many variables affecting a business's short and long-term profitability and viability.
Contact His CPA PC (A Christian CPA Firm) today.
