Buying or selling a business

February 1, 2024




Buying or selling a business can be a complex and lengthy process that requires careful preparation, and professional advice for you to achieve a successful outcome.  Whether you are a buyer or a seller, you need to understand the process, the legal requirements, and the risks involved. Here are some key steps to consider when buying or selling a business:  

Do your homework  

Before you enter into a business deal, you need to do your homework. This means checking the financials, operations, and legal aspects of the business. If you are a seller, you should also have all the relevant documents ready for the buyer to inspect, and make sure you can transfer the business smoothly, such as having leases in place, and giving notice to employees.  Even if you have done your homework, or ‘due diligence’ as it is usually called, before signing an agreement, you should still include a condition that allows you to do more due diligence after signing.  

Agree on the terms  

The next step is to negotiate the terms of the deal. This includes deciding on the price, payment method, asset allocation, and any conditions that need to be met before the deal is finalised. You should work with your legal and financial advisors at this stage to make sure the terms are fair and favourable for both sides. You should also understand and protect yourself, or your company, from any promises, claims, or obligations after the sale.  Once you have a draft agreement that suits both parties, you can sign it and start working on fulfilling the conditions in it.  

Arrange funding then do further due diligence 

Often an agreement will depend on getting funding and doing more due diligence. This means getting approval from your bank or lender, and doing further checks on the business. This could include verifying the financials, inspecting the assets, reviewing contracts and licences, and getting advice from experts. This is your chance to make sure there are no hidden issues or risks with the business before you commit to the deal.  

Get the required approvals  

Some transactions may need specific approvals from certain parties before the agreement can be signed, or the ownership can be transferred smoothly. These parties could include landlords, regulators, or business associates and employees of the business. It is crucial to complete this step thoroughly to prevent any delays or problems in the transaction process. 

Finalise the transaction  

This is the last step where the buyer pays the purchase price and becomes the owner of the business. Depending on the agreement terms, a part of the price may also be kept in a lawyer's trust account. Both parties may then need to complete some tasks after the sale (such as training in the business, or fulfilling warranties and indemnities in the agreement).  

Buying or selling a business in New Zealand is a step-by-step process that requires careful planning, due diligence, and expert advice. Don't try to handle this complex transaction by yourself. Whether you're a buyer or a seller, each step is vital for a successful transaction. Please talk to us if you need advice - we have experts who can help you.