Before signing, you must verify the health of the "part" you are buying. Key areas to investigate include:
: Review licenses and permits to ensure they are up-to-date and transferable.
: You buy a percentage of the company's stock. This is a "warts and all" deal; you become a co-owner of the entire entity, including its hidden debts and lawsuits. 🔍 The Due Diligence Process buying part of a business
When purchasing only a segment of a business, you typically choose between two legal paths:
: You buy specific items like equipment, inventory, or customer lists. This is generally safer because you can leave behind the seller's debts and legal liabilities. Before signing, you must verify the health of
: Create a "notional" or pro forma income statement specifically for the segment you are buying.
Valuing a portion of a business is trickier than valuing the whole because businesses often lose efficiency (synergies) when split up. This is a "warts and all" deal; you
: Inspect the "plant, equipment, and fixtures" to ensure they are in working order. ⚖️ Valuation & Negotiation