Buying half a business

djh2009

I am considering buying 50% of a business ( a shop with good potential) . How do I go about checking the full extent of any outstanding bank loans or outstanding suppliers bills ? Would that be something that my solicitor would check out fully for me as part of the whole transaction ? The person selling half of their share seems very honest and decent but I don't want any surprises after the deal is done.

Its a Limited Company right? Then you should ask him for a set of last 3 years accounts submitted, and you'll be able to see any loans, debtors or creditors in there and any patterns. Ask him for a copy of the last 3 years of bank statements from the company account, it should all tally up with the books.
Then ask him for a copy of all pending orders, and current accounts with suppliers/buyers, debtors and creditors, and get a document drawn up by your lawyer that he swears to the authenticity of the information provided, and some recourse if it proves to be false.

If we are talking about a small business with a small investment that should be enough to make a decision and save you some legal fees. Theres a lot of billable hours in that kind of due diligence. If its a larger or more important investment for you, that kind of due diligence should be done by professionals.

djh2009

Deleted User wrote: »

Its a Limited Company right? Then you should ask him for a set of last 3 years accounts submitted, and you'll be able to see any loans, debtors or creditors in there and any patterns. Ask him for a copy of the last 3 years of bank statements from the company account, it should all tally up with the books.
Then ask him for a copy of all pending orders, and current accounts with suppliers/buyers, debtors and creditors, and get a document drawn up by your lawyer that he swears to the authenticity of the information provided, and some recourse if it proves to be false.

If we are talking about a small business with a small investment that should be enough to make a decision and save you some legal fees. Theres a lot of billable hours in that kind of due diligence. If its a larger or more important investment for you, that kind of due diligence should be done by professionals.

Thank you for that , El Rifle. It is a small enough investment and that sounds like great advice as saving on some legal fees is important if I am to invest. Thanks again.

djh2009

djh2009 wrote: »

I am considering buying 50% of a business ( a shop with good potential) . How do I go about checking the full extent of any outstanding bank loans or outstanding suppliers bills ? Would that be something that my solicitor would check out fully for me as part of the whole transaction ? The person selling half of their share seems very honest and decent but I don't want any surprises after the deal is done.

If I engage a solicitor for this transaction would it be part of their normal activity to check all outstanding loans and bills for me ?

djh2009

djh2009 wrote: »

If I engage a solicitor for this transaction would it be part of their normal activity to check all outstanding loans and bills for me ?

Well it depends on the scope of work. If it was a solicitor specialising in this kind of thing, then they should provide you with a detailed scope of what they will do as part a standard due diligence process before you engage their services - and thats going to show the billable hours in the process. Or at least it should give you a fairly close estimate. Just don't sign up to the 'we don't know how long its going to take' it gives them too much rope to hang your wallet with!

djh2009

Deleted User wrote: »

Well it depends on the scope of work. If it was a solicitor specialising in this kind of thing, then they should provide you with a detailed scope of what they will do as part a standard due diligence process before you engage their services - and thats going to show the billable hours in the process. Or at least it should give you a fairly close estimate. Just don't sign up to the 'we don't know how long its going to take' it gives them too much rope to hang your wallet with!

Thanks again, El Rifle. I just aren't sure if I need to instruct him to search fully for all this sort of stuff or if he would normally do it as a matter of course. I don't want to be "telling my granny how to suck eggs" !!

Well if its a matter of you instructing him then for sure dont be afraid to tell him X Y and Z are the things you require as part of this due diligence. I find its a lot cheaper to be in the driving seat when using lawyers, dont be afraid to tell him how to suck eggs!

jimmii

Better to give someone their expectations even if it may be obvious if you don't then it may turn out something you thought was obvious is just not standard practice. At the end of the day you are paying them to do a job so you are in a position to tell them what you want done.

Good luck with it I have a shop its good craic!

delahuntv

Assuming the store has been trading for a while, your first and easiest step is to go onto the cro website, go to the compnay sear area and key in the company name.

The corporate filings will come up and you can then purchase whatever filing you wish to view (2.50 each).

Accounts for last 2/3 years + any mortgage/charge documents. - They will be in your email instantly.

Then go to a site like solocheck and buy a credit report.

Totla cost of all that will be less than €15 and it will certainly give you a starting point without the vendor knowing.

Gloomtastic!

If you do buy-in, how are decisions going to be made going forward?

50/50 splits can result in serious problems for business partners where ego and personality take precedence over what is right for the business.

Have you looked at a 51/49 option? Who is the better person to lead the company forward?

AndyJB

djh2009 wrote: »

I am considering buying 50% of a business ( a shop with good potential) . How do I go about checking the full extent of any outstanding bank loans or outstanding suppliers bills ? Would that be something that my solicitor would check out fully for me as part of the whole transaction ? The person selling half of their share seems very honest and decent but I don't want any surprises after the deal is done.

Hi,
All the previous posters have raised great points for you to look at.

Have you retail experience? Will you work in the shop? Before you commit why not offer to work there for a few days eg evenings/mid-week/weekends. Looking at the books is one thing but getting 1st hand knowledge of any staff and how they deal with customers or not could also be useful. Would be ideal if other staff didn't know who you were, if possible.

Just my pennies worth.

Have a good Christmas.

alantman

I recommend an accountant to go through the accounts. They are better placed to add up the ins/outs as well as deconstruct anything flashy in the accounts.

After that, a shareholder agreement _needs_ to be in place. Especially if you are going 50/50. If your future biz partner has no interest in a shareholder agreement, I would be worried. It is money well spent! Get your solicitor onto that.