due diligence when buying a business
DESCRIPTION
Etienne Lawyers assist you in preparing for or to undertake a due diligence exercise to sell or buy a businessTRANSCRIPT
www.etiennelaw.com
Due Diligence When Buying a Business
Presenter: Steve Brown
www.etiennelaw.com
What is due diligence? What is the purpose behind due
diligence? Who Conducts due diligence? What is the due diligence process? Where is information obtained? Lessons from the cases.
Overview
www.etiennelaw.com
What is due diligence?What is due diligence?
Due Diligence is:
Detective work;
Doing your homework;
Over coming unforeseen and unwanted issues after acquiring a business
www.etiennelaw.com
Purpose behind due diligence?Purpose behind due diligence?
To minimise riskThe more informed a purchaser is
the more chance the purchaser has to not loose money
www.etiennelaw.com
Purpose behind due diligence? Confirm what the business
is;
Confirm that the soundness of any company to find contingent liabilities;
Avoid misunderstandings as to the type and condition of the business being bought;
Investigate the state of management of the business;
Confirm the status of pending lawsuits; and
Identify the extent and quantum of contingent liabilities
www.etiennelaw.com
Purpose behind due diligence?Purpose behind due diligence?
Essentially gain information that will be useful for valuing assets, defining representations and
warranties, and/or negotiating price concessions;
www.etiennelaw.com
Who conducts due diligence?Who conducts due diligence?
Due Diligence Committee Comprised of purchaser Purchasers lawyer Purchasers accountant Purchasers financier Others that are need as required by the
transaction
www.etiennelaw.com
Acquire Target knowing all that is to be known
Given the time and money the Purchaser has/wants
To spent
Use Results tonegotiatePurchase
terms
DDC UndertakesDetective
work
Form DD
C’ttee
Obtain Target toacquire
PreliminaryInvestigation
ofTarget
What is the due diligence process?What is the due diligence process?
Due DiligenceProcess
www.etiennelaw.com
Where is information obtained?Where is information obtained?
From the target, data room, employees on-site investigations
From the purchaser’s own knowledge From industry bodies From trade magazines From consultants From customers, clients and suppliers
www.etiennelaw.com
Lessons from the cases….Lessons from the cases….
Have a due diligence agreementPlessey Components Pty Ltd v
Cant
Determine what is proper due diligence objective or subjective test SDS Corporation Ltd v Pasdonnay Pty Ltd &
Anor
Minimise disruptions to target SDS Corporation Ltd v Pasdonnay Pty
Ltd & Anor
Get a clear understanding between the parties Hayle Holdings Pty Ltd v Australian Technology Group Ltd [2000] FCA 1242
www.etiennelaw.com
Questions?Questions?