Process Of Conducting Due Diligence In Purchasing Australian Businesses

March 29, 2022    propertylawyersperthwide
Process Of Conducting Due Diligence In Purchasing Australian Businesses

It is vital to know all about the business and follow all the protocols before striking a business deal in Australia. If you are a prospective business owner, and you want to invest in an established business, then ensure to examine all the business-related information. Adhering to this process is called due diligence.

Here we will all about the procedure of conducting Due Diligence while purchasing Australian businesses. You can also have your queries solved if you contact due diligence lawyers.

Due Diligence

Due diligence is the process that is conducted after the buyer and seller agree on the business deal. But it is also important to know that the process happens before the binding contract is finalized or signed.

Benefits Of Due Diligence Process

There are many benefits of conducting due diligence.

  • It is one of the best ways to evaluate the value of the business.
  • It also lets you know the risks associated with the business.
  • Due diligence allows you to view all the confidential and important business data and reports.
  • There is a letter of intent that specifies the time period when you can check all the details and get back.
  • Diligence lawyers ensure to provide you with a copy of critical business documents. By accessing this information, you can check the status of the business’s finance. You can judge the financial position of the company and know about the risks too. it also helps you check the scope or potential of the business.
  • It also provides you with a chance to find answers to your queries. Your property solicitor can ask any questions related to the business and property. 
  • The due diligence process also makes sure that you get a good value for a business.

Examining A Business

The conduct of the due diligence process needs you to review the following details:

  • You must start with accessing all the income statements generated by the businesses.
  • Check all the records of both the receivable accounts and payable accounts.
  • Viewing the balance sheets is also considered one of the most necessary things.
  • Also, ensure to review the tax returns that include the business activity statements of the last 3 to 5 years at least.
  • Do not forget to check the profit and loss records for at least the last 2 to 3 years.
  • Be informed about the cash deposits. Check the payment records as well as reconciled with the accounts
  • Utility accounts are another important part of the list.
  • One of the crucial things to know about is the existing and past bank loans taken by the company.
  • Even the letters of credit hold importance.
  • You might ignore this one, but keep this too in your checklist – details about the minutes of meetings with both management and the director.
  • Audit work paper files are also critical to have. You must review the same if it is available.
  • The seller has claims about their business such as why he is selling the business, what is the business’s reputation, etc. You must know about it.
  • Other privacy details such as the employee’s list, trading partners, client’s list, relationship status with the customers and employees, etc.
  • Stocks of the company
  • What are the company details associated with the plant, tool, equipment, fixtures, vehicles, etc?
  • To know whether all the company assets are in good working condition or not.
  • Whether the same is licensed or not.
  • Property lawyers in Perth insist that knowing about the intellectual assets of the business is also deemed critical. This includes the things like intellectual property, trademarks, patents, and so on. 
  • If there are some existing contracts with clients or the staff of the business.
  • Check if there is a partnership agreement
  • You also need to know about the lease arrangements of the company. Property lawyers Perth WA can help you in this regard. 
  • Does the business run on an automated financial system? know about it.
  • What are the details of credit and historical searches of the company? Ask for such details.
  • Lastly, it is also your job to evaluate whether the value of the business is good enough and the price you are asked to pay is fair or not.

Be Aware Of The Warning Signs

Stay very cautious of the sellers who:

  • Do not reveal all the information. If they are not detailing you with important things such as why they are selling or not providing you the financial statements, then there can be something fishy. Do not settle without gaining details on the company’s licenses and permits. You must also know about the staff contracts.
  • If the business is not agreeing to a trial period or not giving you adequate time to conduct due diligence which is at least 30 days, then do not fall into their trap.
  • If the company is not introducing you to their suppliers and estate agent, then also you need to be cautious.
  • If the business is involved in legal proceedings, stay wary.
  • If the business is pushing you to close the deal quickly, it can be alarming.


If the due diligence process happens smoothly, it can mean that you are buying a business that will fetch you good money rather than purchasing a business that costs you money. It is highly recommended that you perform due diligence only in the presence of the due diligence lawyer. There are many esteemed due diligence lawyers in Perth WA.

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