Author Name:   Pranati Shubha

This article throws light upon the areas which are important to be considered before buying an existing company.

Buying a new company: points to be considered

It has been aptly put by Arthur Ashe that “Start where you are. Use what you have. Do what you can.” A new business requires patience to pry into all necessary details, a self introspection to know the suitability of the business, a self assessment to keep things under complete discretion and a dynamic mind to read the market tenor. There are quite a number of drawbacks which are grossly tethered with a new business.

The goodwill of the business is one of the most important things to look into while buying a new business. A worthy goodwill can take a business to great heights and a downer one could make that business slump into annihilation. One should be vigilant enough to consider that the business he is going to buy has a good reputation in the market. The business which is to be acquired should have all its equipments, machinery in a pretty good shape.

If the equipments, machinery or the plant urges some big investment for improvement or to even bring some of them in a workable condition then these are not at all welcoming. One should do some diligent ground work regarding the same before purchasing a new business. One of the most important aspects of a new business is its geographic location. The geographical location acts as a fortune for the business.
A good location would easily fetch in investments, customers and a good reputation. A poorly located business would face frailty at all the formerly mentioned aspects. One should also look into the liability aspect before making the final move. A company could have a congenial relationship with the lenders or could also be strained as one will inherit a prior payment dispute or an antecedent default in payment if any. So, one should be wise enough to do all the required checks and balances.

The leases attached to the premises of the business should also be duly checked. Leases can be a canister of traps for the unwary. While taking over the desired leasehold one should glean some good legal advice regarding responsibilities of the premises, rent, service charges, dilapidations and other matters.

One should also look into tax related issues like VAT registrations and the specifications attached to it, value of the tax assets if any. One more colloquial aspect these days is a non-compete clause. The non-compete clause can be a baffling aspect and must be interpreted in a fitting manner. Generally non-compete clause are difficult to enforce and must be prudently drawn if it is to be enforced.
Finesse and flaws are two faces of the same coin and precision in flipping it will decide one’s fortune. The same rule applies while initiating a modish thing like in this case a new business.

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