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What do you need to do before buying another business?

| Jun 9, 2020 | Business Law |

When some individuals start a company, they often believe that the only way to do so is to build it from the ground up. While this is how many Michigan business owners grow their company, it’s certainly not the only way to do so. You may find it beneficial to acquire another company. There are many benefits and downsides to doing this.

If you’re thinking about purchasing another company, then you’ll want to do a lot of background research on it before you move forward with the process. You may want to start by doing a little digging around online to check up on its leadership, licensing and reputation.

You may want to go ahead and draft a letter of intent to the company to let them know of your interest in purchasing them as part of the next step in the fact-finding process. The company’s owners will likely want you to sign a confidentiality agreement before sharing any proprietary information, contracts or financial documents with you.

One of the first things that you should discuss is what would happen with the company’s assets, including their leadership and staff if you were to buy them out. You should make sure that this aligns with your interests.

Next, you should gain a clear perspective on the breadth of services or products that the company that you’re looking to acquire produces. You need to understand who their customer base is as well. The business that you’re looking to purchase has likely invested significant effort in finding the right product or service mix to keep them profitable. They’ve probably worked hard to build up their customer base. You need to understand their process so that you can maintain or improve upon it.

You’ll want to take time to learn about the company’s tangible and intellectual property rights as well as their digital assets before you negotiate the price with its owners.

It can be challenging to assess a company’s value. An accountant should be able to aid you in honing in on an appropriate valuation, though. You may also find it helpful to bring in a business law attorney to negotiate a competitive purchase price for the Detroit company that you’re looking to buy. Your lawyer can draft the appropriate documents to legalize the deal once you’ve settled in on a price.

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