What is Due Diligence by Denver Business Attorney

What is due diligence?  Business attorneys are commonly asked this question when business owners are considering selling Denver Business Lawyer their business or individuals are looking at buying a business or merging with a business.  Due diligence is a process and very important process!  Due diligence can be considered a legal, business and financial investigation of the company.  In conducting such investigation the seller is confident in the purchase price they are requesting and the buyer is confident they are paying a purchase price that adequately reflects the value of the business or business interest they are purchasing.  A Denver business attorney has drafted this article and below is a list of items or areas to consider when performing due diligence.

Financial Review: When performing due diligence you should review at least the prior 3 year financial history.  This review can be completed by reviewing income statements, balance sheets, profit margin analysis, tax returns, depreciation schedules, sales reports, list of assets, fixed expenses and any other item that can be produced.  As a buyer, it is important to keep in mind that you can request any document(s) you choose, but you also should attempt to keep such requests reasonable based upon the circumstances.

Employee Information: A chart or breakdown of employee information such as number of employees, key employees, employee pay and salary, employee benefits & benefit plans, employee qualifications, hiring process procedure.

Intellectual Property: Documentation regarding any patents, copyrights, trademarks, trade names, trade secrets etc.  This should including documents relating to royalties for use of any intellectual property.

Operations: A statement or chart showing how the business operates.  What is the process at each level for the business to be successful?

Customer Base Profile: A potential buyer may request a customer list or customer profile.  If I were representing a seller, I would likely be hesitant to disclose an entire customer list, but rather may provide a list of the total number of accounts or customers.

Legal and Liability Issues: A potential buyer will request disclosure of any known current legal claims or issues or potential legal claims or issues.  Additionally, the seller should be prepared to provide copies of all licenses and permits used in the operation of the business.

Contracts: Copies of contracts with all 3rd parties will likely be requested by a potential buyer.  Further, the seller should be prepared to provide copies of all lines of credit, loans and notes with third party lenders.

A business attorney at The McGuire Law Firm can assist you as a seller or a potential buyer in the due diligence process.  Our business attorneys in Denver are available to consult and advise regarding your business questions and issues.

Contact The McGuire Law Firm to schedule your free consultation with a business attorney!