Two separate businesses may decide they would perform better by working together. Or, one business may agree to buy and acquire another. Either way, the North Carolina buyer needs to perform due diligence before money changes hands.
Forbes offers several business areas to explore to see how well the merger or acquisition may proceed. Such insight can prove vital to either avoiding a disaster or better ensuring commercial success.
Buyers should perform a thorough examination of the target company’s past, current and predicted financial health. Specifically, it is good to gather details regarding whether the target company is in debt, the company’s definition of working capital, and whether enough money exists to cover the merger or acquisition transaction and remain afloat.
Customers and profits
The target company’s customers may or may not continue doing business with the company after its acquisition or purchase. Buyers need to gauge potential risk regarding customer loyalty and satisfaction. Currently, unresolved customer complaints may require a resolution after the transaction, and current customer policies and/or sales terms could require updating.
As noted by the Minority Business Development Agency, one benefit of merging with or buying an existing business is gaining access to existing intellectual property. Buyers should take a deep investigative dive to understand all patents, protection, trademarks and copyrights the target company currently owns.
Buyers should look into whether there is a natural and sustainable match with the target business. There could be complementary products or services between the two organizations. Additionally, employees from the two companies should get along well and (hopefully) stay on after the completion of the transaction.
Proper due diligence also requires looking into distribution and production facilities. Untapped capacity in such facilities could increase overall profits.