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Once the preliminary agreement is signed, you and an accountant, or a lawyer
will perform due diligence on the business. The legal due diligence will
focus on the potential legal issues and problems that may serve as impediments
to the transaction, as well as shed light on how the documents should be
structured. The business due diligence will center on the strategic issues
surrounding the transaction, such as the status of the relationship with the
franchisor, the quality of the location, customer and employee relationships,
and the information necessary for financing the transaction.
To thoroughly investigate the business, you will need to look at all the
documents of that business. The seller should have all these documents.
- Corporate Documents
- Financial Documents
- Employee Documents
- Assets
- Leases
- Contracts
- Liabilities - such as liens or any pending law suits.
Don't be surprised if the seller stalls on any of these items. No one
likes their life peered through a microscope. In response, give the seller a list of
items that need to be prepared. Agree on a date in which these items
should be made available. Make sure to hire an attorney and an accountant, that
specializes in these types of transactions.
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