06: The buying process

Before making an initial offer, you should get professional advice to obtain a true valuation of the business you are interested in buying. The formal offer should be based on thorough research and should reflect the level of inherent risk.

Any offers you make should be ‘subject to contract’ and include other relevant details, such as whether all employees would be retained and how the purchase would be financed. Heads of terms or heads of agreement are then signed which specify what you have agreed to buy, the payment structure, a period of exclusivity and any preconditions, warranties and indemnities.

Detailed due diligence follows in which you must make an extensive examination of the company. If problems are uncovered, you may at this stage lower the offer before closing the deal.