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Things to Consider When Buying a Business

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Acquiring another company is an exciting step as you grow your enterprise. It can mean growing your customer base, a synergy of products and services, or even expanding into a new market. Before you close on your business acquisition, however, it’s important to conduct yourself appropriately. Take the time you need to make the decisions best suited to further your business interests and expand your enterprise. Read on for a discussion of several important items to keep in mind when acquiring a business in Illinois. Call a savvy Chicago business purchase and sale law firm for advice and assistance.

Conduct Your Due Diligence

It’s a bit of a catch-all point, but it’s vital to perform proper due diligence before acquiring another business. Make sure you and your legal team do a thorough dive into the target company, including prior and future lawsuits, other liabilities, business dealings, areas of reputational concern, areas of regulatory concern, and industry-specific market research.

Find out how the seller is viewed in the community and among customers and peers; analyze their growth potential; find out why the seller is selling, and whether they have concerns they have not yet shared. Get a picture of their operations, employees, supply chain, capital expenditures, and all other aspects of how their business has been run to date.

Due diligence allows you the peace of mind to know that you’re actually buying what you think you are buying, covering everything from the company’s books to its reputation in the industry, customer base, and legal concerns.

Review the Target’s Financials

One important area of focus: the company’s financials. Unfortunately, you cannot take a business at their word regarding their financial soundness. Make sure you have your own accountant review the seller’s business and key financial indicators such as debts, expenses, profits, sales, cash flow, assets, and other matters. A thorough review of the company’s books will also help you identify any red flags in advance of acquisition.

Review the Target’s Contracts, Including Their Lease

If you’re buying a business, especially if you’re conducting an asset purchase, and you intend for the business to continue operating under your management, you’ll want to do a deep dive into their existing contracts. Do you need to renegotiate any contracts with product or service providers, or with customers? Can you assume the seller’s lease without an increase in rent or other changes to the terms? These may seem like small concerns but, added together, they can combine into additional headaches and financial liabilities on top of the purchase price.

Consider Stock vs. Asset Acquisition

There are multiple ways to acquire another business. Principally, you can conduct either a stock purchase or an asset purchase. An asset purchase gives you all the assets you choose to purchase, including real estate, fixtures, equipment, intellectual property, and other items, and any liabilities you are willing to assume (e.g., lease obligations post-Closing). The purchased assets move to the new entity, while the old entity must be wound down.

In a stock or entity purchase, you are fully acquiring the entire company via outstanding shares. You will own the entire company, both assets and liabilities, including any unknown or undisclosed liabilities.

There are pros and cons to each approach. Make sure to discuss your options with your legal and financial teams to determine the best approach for you.

Diligent Illinois Entity Acquisition Lawyer Ready to Help You Through Your Business Transaction

If you’re purchasing or selling a business entity in Illinois, contact a business purchase and sale lawyer who can offer the individualized guidance you need to make the decisions critical to the success of your enterprise. Call an experienced, dedicated business lawyer at MacDonald, Lee & Senechalle, Ltd. for a consultation, in Hoffman Estates at 847-310-0025, or in Des Plaines at 847-298-5030.

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