Financial due diligence: don't miss the important stuff
Buying a business is a high-risk investment. Miscalculations, hidden debts or inflated assets can be an unpleasant surprise. Financial due diligence is a mandatory step that allows you to identify all hidden risks. Study the financial statements for the last 3-5 years. Check revenue, expenses, net profit and debt burden.

Make sure the company has no outstanding loans, tax arrears or unrecorded liabilities to suppliers. Assess the condition of equipment, inventory, real estate and other assets. Check if they are pledged.

LLC "EIFOS HUB" uses EBITDA financial metrics to assess the real profitability of a business.

Tip: Engage a professional auditor or financial consultant to avoid calculation errors.

Legal purity of business
Errors in contracts, unfulfilled obligations or problems with licenses can hinder the company's work. Study contracts with customers and suppliers, licenses, employment contracts. LLC "EIFOS HUB" lawyers will identify risks and prepare the company for integration into your structure.

We check the company for:

• absence of debts of the owner to counterparties
• presence of court decisions, as well as initiated proceedings
• litigation involving the seller-owner, as well as a third party
• correctness of execution and legality of current contracts
• registration of trademarks, patents, intellectual property.

Advice: Hire an experienced lawyer who specializes in M&A transactions to identify and eliminate possible risks.

Risks associated with business reputation
A company's reputation is its intangible asset that directly affects customers, partners, and employees.

When buying, it is important to make sure that the deal will not affect the company's reputation, customers and partners will not go to competitors, and key employees will remain. Monitor negative reviews in the media and social networks, identify low ratings. Research the opinion of the company on the market, its relationships with customers, suppliers, and partners. This can be done through reviews, ratings, and public reports.

Tip: think through a plan for training employees and customers in advance, think through arguments in favor of the fact that the change of ownership will benefit the company.

When thinking about buying a business, large or small, planning mergers and acquisitions (M&A), it is important to remember that you are acquiring not only assets and current indicators. You are also taking on the company's past with all its successes, mistakes and hidden risks, as well as its future, full of uncertainties and opportunities.

Having concluded a deal, you will not have to start from scratch: you will receive ready-made supplier and customer bases, an established reputation, but you will also encounter "pitfalls". What should you pay attention to when buying a business?

Equity or Assets
You can buy the seller's stake in the business itself - stock if it's a corporation, or ownership interests; or buy just the assets of the business - equipment, inventory, furniture, intellectual property, and even the company name.

Which is better depends on your goals, situation, the specific company, and the potential risks. By buying a stake, you become the owner not only of the assets, but also of all the liabilities, success stories, and problems of the company. By buying just the assets, you avoid many of the legal and financial risks associated with the business's past, but you may miss out on intangible assets, such as a customer base or reputation. Each decision requires careful analysis.

Tip: The decision depends on your goals. If it's important to you to preserve all of the company's relationships and processes, it's better to consider buying a stake. If you want to minimize risks, it's better to focus on buying the assets. In either case, careful due diligence is essential.

Operational processes: efficiency inside
When buying a business, it is important to make sure that the operational processes will continue to work stably, and the buyer will be able to manage the company effectively. Analyze the company's internal processes, production lines, management systems, marketing strategies, interaction with customers. Weaknesses in the supply chain or outdated systems can slow down growth. Assess the stability of the customer flow and the work of the sales department. Check the efficiency of CRM and ERP systems.

Tip: Budget for modernization or optimization costs in advance.

Market position
The market dictates the conditions in which the business operates. Competition, demand and the economic situation affect its future. Check how resilient the company is to changes in the market. Assess its share among competitors, study trends and forecasts. How dependent is the business on one client, product or supplier?

Tip: Use a SWOT or PEST analysis to assess the external and internal factors affecting the business.

Employees: A Team for Success
People are the company's most valuable asset. Losing key employees after a deal can disrupt its stability. Conduct face-to-face meetings with key specialists to understand their motivation. Offer bonuses, long-term contracts, or training to retain employees and ease the transition period.

Tip: Outline an integration and communication plan in advance so that employees feel part of the changes.

Preparation is the key to success
Buying a company is a complex process that requires comprehensive analysis and the involvement of specialists. A thorough study of finances, legal documentation, reputation, and market conditions will help minimize risks and ensure successful business management. It is important to remember that proper preparation is the key to success in any business project.