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What to look for when conducting due diligence

On Behalf of | Feb 2, 2023 | Business & Commercial

Part of purchasing a business in Maryland involves conducting due diligence. This involves analyzing and reviewing all pieces of a business to decide if the purchase will be a wise investment.

Many potential buyers use a due diligence checklist. The following components should be a part of every due diligence checklist, and there are many questions you should be asking for each component.

Requesting and reviewing documents

Perform a thorough evaluation of the business itself. Your due diligence process will necessarily involve requesting information and documentation from the business.

Is the business open and receptive to sharing information with you, or are they hesitant? If they delay answering your questions or provide you with incomplete information, you should proceed with caution.

Some of the documents you request will likely have to do with the finances of the business. Review all financial records and pay particular attention to the debts of the business.

The products or services

One of the reasons you are purchasing the business may be because you believe in or support the products and services they are providing. Make sure they are adhering to all legal requirements when it comes to their products and services.

Additionally, review their processes for efficiency and productivity. Their products or services might be selling well right now, but any problems with their current processes could lead to problems in the future.

If you choose to purchase the business, take note of any changes you may have to make to inefficient or ineffective processes.

The business environment

Finally, talk to the employees and get a sense of the company culture. Do the employees seem happy? Do you get a sense that the business treats their employees well?

Look for any signs of employee dissatisfaction. A business with a history of legal action taken by employees or a reputation for treating employees poorly may not be one you want to associate your name with.

Performing due diligence is lengthy and complex. Experienced business attorneys can help you through the due diligence process.