If your Maine-based small business is considering acquiring another company, you probably realize the importance of hiring an expert in due diligence and valuation. Unless you’re well-versed in performing a comprehensive financial analysis of a business, it doesn’t make sense to buy one without using a specialist. A due diligence report does three critical things:
- Ensures the sellers’ pertinent information is correct.
- Gives a detailed explanation of the business.
- Contains vital information that can be used when negotiating the acquisition, including securing financing, establishing the tax and accounting basis of the assets, and integrating the new business into your existing business.
Most importantly, due diligence exposes possible deal-breakers. It’s possible that the seller may get their business ready for a sale in such a way that it looks better than it really is. A professional due diligence review protects you as the buyer against the overstatement of assets and understatement of liabilities. It also shows the historic earnings of the company, and the likelihood that forecasted operations can be met.
Sometimes the tax consequences of the proposed acquisition are overlooked. Depending on the operating structure of your company and the one you are looking to buy (for example, a C corporation, S corporation or partnership), it may be better to receive assets versus stock. Keep in mind that a badly structured sale can result in a tax disaster. Filler & Associates can help you figure out the best way to structure an acquisition for your company.