How to Buy a Business: 13 Steps to Buying a Business in Australia in 2023

Introduction

I'm in the middle of buying a business as we speak, and I advise on buying businesses as part of my core Legal Services and Business Advisory Services. So what better time to write a guide about How to Buy a Business!

13 steps to buy a business. How to buy a business. Blaze Business & Legal Logo.

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When buying a business in Australia, it's essential to proceed with caution and take proactive steps to protect yourself and your investment. Buying a business can be a lucrative opportunity, but without proper care and guidance, it can quickly turn into a risky endeavor. In this blog post, we will explore the crucial measures you should take to safeguard your interests, and we will show you how to buy a business and some of the ways you can protect yourself in doing so.

Looking at buying a business in Australia? Learn how to protect yourself and your investment during the acquisition process. Follow these essential steps and seek expert advice to ensure a smooth and secure purchase.

Rachelle Hare - Blaze Business & Legal

Key Takeaways

  • Protecting yourself when buying a business requires due diligence, professional assistance, and understanding the legal framework.
  • Contracts play a vital role in safeguarding your interests, so carefully draft and review key agreements.
  • Assessing financial viability,
  • conducting thorough evaluations, and understanding employee and intellectual property considerations are crucial steps to protect your investment.
  • Communicate closely with your lawyer during the settlement process and take necessary post-settlement actions to secure your investment.
  • Investigate the business's social media presence and address any potential problems.
  • Take proactive steps to secure access to all assets, change locks, and update seller's details.
  • Develop a post-acquisition integration plan to ensure a smooth transition.
  • Seek professional advice and conduct comprehensive due diligence to make informed decisions.
  • Value the business appropriately and negotiate a fair purchase price and structure.
  • Blaze Business & Legal are here to help you with all your business purchasing needs, including commercial advice, financial forecasting and legal advice. Contact us today.


How to Buy a Business (and protect yourself at the same time)

1. Do Your Due Diligence

Before agreeing to any business acquisition, it's vital to conduct thorough due diligence. This process involves researching and gathering information about the business and its market position, financial statements, and the reputation of the business and its owners. By performing comprehensive due diligence, you can uncover potential risks, identify hidden problems, and make informed decisions.

In my experience...
During one of my recent client engagements, a buyer expressed interest in acquiring a retail business with a promising reputation. However, upon conducting due diligence, we discovered a significant decline in the business's financial performance over the past two years. Shannon carefully analysed the financial statements and identified the underlying issues with the Seller's business. Many of these were unfortunately something that our client couldn't recover from if they bought the business. We advised our client to reassess their investment decision, they pivoted, and we helped them negotiate a more favorable deal for a different business.

2. Investigate Social Media Presence and Potential Problems

The online presence of the business you wish to purchase, especially its social media platforms, can significantly impact its reputation and success. Before finalising any business acquisition, it's crucial to investigate the target company's social media profiles, online reviews, and customer feedback. This evaluation will help you identify potential issues, gauge customer satisfaction, and assess the effectiveness of the business's marketing strategies.

Protect yourself when buying a business by investigating its social media presence and analysing potential problems. Ensure you understand the business's online reputation before making your investment.

Rachelle Hare - Blaze Business & Legal

3. Seek Professional Assistance

One of the most critical steps in protecting yourself when buying a business is seeking advice from a qualified Commercial Lawyer. Their expertise in business law and regulations can provide valuable guidance throughout the acquisition process. From reviewing legal documents and contracts to negotiating and structuring the deal, a Commercial Lawyer is an indispensable asset in safeguarding your interests.

Make sure you ask your chosen Lawyer whether they have advised on business sales and business purchases before. This is a niche area of Commercial Law and has its own rules that need to be complied with.

Don't underestimate the importance of seeking professional assistance when buying a business. A Commercial Lawyer will help you navigate legal complexities and ensure your investment is protected. And an experienced Business Adviser can help you avoid any commercial pitfalls - a Lawyer helps you do the purchase, while a Business Adviser helps you decide whether you should do it.

That's largely why we set up Blaze Business & Legal, to help you with both business advice and legal advice - to make your life easier!

Contact us for our professional assistance on both the business and the legal aspects of your business purchase

Meeting with your Lawyer. Businesspeople purchasing a Business.

4. Understand the Legal Framework

To protect yourself during a business acquisition, it's essential to familiarise yourself with the legal framework surrounding such transactions. Laws and regulations related to business acquisitions, employment, intellectual property, and licensing vary from jurisdiction to jurisdiction. Understanding these legal requirements will help you comply with relevant regulations, minimise legal risks, and ensure a smooth transition.

Let's be real though, it would be pretty hard for you to learn all of this information and "legal stuff" just to buy a business. That's where your Commercial Lawyer comes in - we understand the laws around business purchases and business sales. And we can guide you through it step by step so you don't have to gain a comprehensive understanding of the legal framework surrounding business acquisitions.

Commercial Lawyers help you to protect yourself by complying with relevant laws and regulations, and minimising potential legal risks during a purchase of a business.

Rachelle Hare - Blaze Business & Legal

5. Protect Your Interests with Contracts

Contracts play a vital role in protecting your interests when buying a business. Key contracts, such as the Purchase Agreement, Lease Agreement, Non-disclosure Agreement, and Non-compete Agreement, should be carefully drafted and reviewed. These contracts outline the terms and conditions of the acquisition, protect confidential information, restrict competition from the seller, and ensure a smooth transfer of assets.

In my experience...
During a recent business acquisition in the hospitality industry, our client was excited about purchasing a popular restaurant. However, during due diligence, we discovered significant outstanding tax liabilities that the seller had not disclosed. We advised our client about buying the business through the transfer of shares in the seller's company versus the purchase of the business name and assets (without taking on the company liabilities). We were able to structure our client's purchasing vehicle to ensure our client did not take on ownership of those outstanding tax liabilities, which would have made the business non-viable right from the start.
This experience highlights the importance of conducting thorough due diligence and relying on expert advice to protect yourself from unexpected financial risks.

6. Assess Financial Viability

Assessing the financial viability of the business you intend to buy is crucial for making an informed investment decision. Conduct a thorough analysis of the business's financial health, including examining revenue, expenses, and cash flow statements. Identify any potential liabilities, outstanding debts, or pending legal disputes that may impact the business's profitability and future prospects.

Protect yourself by thoroughly assessing the financial viability of the business you plan to acquire. Conduct a comprehensive analysis to uncover potential risks and ensure a sound investment.

Rachelle Hare - Blaze Business & Legal

Assessing financial viability. Buying a Business

7. Conduct a Thorough Inventory and Evaluation

To protect yourself when buying a business, it's essential to conduct a meticulous inventory and evaluation of the business's assets, liabilities, and contracts. Assess the physical assets, such as equipment and inventory, to ensure their condition aligns with the seller's representations. Review existing leases, contracts with suppliers, and other agreements to understand any potential risks or obligations you may inherit.

Your Lawyer can help you with all of these tasks. Reach out to Rachelle to discuss your business purchase.

Don't overlook the importance of a thorough inventory and evaluation when buying a business. Protect your investment by assessing assets, liabilities, and contracts in detail.

Rachelle Hare - Blaze Business & Legal

8. Understand Employee Rights and Obligations

When acquiring a business, it's crucial to understand the rights and obligations of the employees you will inherit.

Keep in mind that it's not as easy as just saying that you're now the employer. You actually need to draft and enter into new Employment Contracts and Services Agreements with staff!

Ask your Lawyer to review existing Employment Contracts and agreements to ensure compliance with labor laws and regulations. Evaluate employee satisfaction and any potential labor issues that may impact the business's operations or culture.

Safeguard your acquisition by understanding employee rights and obligations. Comply with labor laws and regulations, and evaluate potential labor-related risks.

Rachelle Hare - Blaze Business & Legal

9. Consider Intellectual Property and Trademarks

Intellectual property (IP) can be a valuable asset when acquiring a business.

You should work with your Lawyer to determine if the business owns any patents, copyrights, or trademarks that contribute to its value. Assess the strength and protection of existing trademarks to avoid potential legal disputes. Address any infringements or licensing issues to secure your rights and protect the business's brand.

Protect your investment by considering the intellectual property and trademarks associated with the business. Secure ownership rights and address any potential infringements.

Rachelle Hare - Blaze Business & Legal

10. Determine Whether You Need to Finance Your Business Purchase

Let's face it - if you don't have stacks of cash lying around, you'll probably need to finance your business purchase. There are many different things you need to know when it comes to getting finance and dealing with business brokers and financiers. Here is a comprehensive guide that we've written to help you out:

Understanding Business Finance in Australia


11. Negotiate the Purchase Price and Structure of the Deal

Negotiating a purchase price and deal structure is critical to protecting yourself when buying a business. Determine a reasonable valuation based on financial analysis, market trends, and the business's potential for growth.

Consider different payment structures and financing options that align with your goals and minimise financial risks. It can be useful to obtain advice from a Business Adviser here, as they can help you to better understand the deal structure and proposed pricing.

Secure your investment by negotiating a fair purchase price and structure. Carefully consider valuation and financing options to protect your financial interests.

Rachelle Hare - Blaze Business & Legal

12. Day of Settlement

On the day of settlement, close communication with your Lawyer is vital to ensure a smooth and secure transaction.

Your Lawyer will oversee the preparation and execution of all necessary documents, verify the transfer of ownership, and facilitate the payment of the purchase price. They will also assist in completing any required registrations or filings to formalise the acquisition.

Maintain close communication with your Lawyer on the day of settlement. Ensure a smooth and secure transaction by following their guidance as they work with you to complete all necessary steps.

Rachelle Hare - Blaze Business & Legal

Day of Settlement. Buying a Business.

13. After Settlement

After the settlement of the business acquisition, there are several important actions you should take to protect your interests and ensure a successful purchase:

  1. Transition management and staff: If applicable, develop a plan to smoothly transition the management team and employees into the new ownership structure. Clear communication and proper handling of the transition will help maintain productivity and employee morale.
  2. Develop a post-acquisition integration plan: Create a detailed roadmap for integrating the newly acquired business into your existing operations. This plan should address key areas such as finance, operations, human resources, and marketing. By having a well-thought-out integration strategy, you can streamline processes, leverage synergies, and maximise the potential for success.
  3. Change locks, update seller's details, and take over social media profiles: As part of securing your investment, it's essential to change the locks and update access to the physical premises. Additionally, update seller's details with relevant authorities and ensure you have control over the business's social media profiles and other online platforms.
  4. Ensure access to all assets and information: Verify that you have access to all assets (if you haven't already), including digital assets such as website login details, domain registrations, and intellectual property documentation. It's crucial to have control over all aspects of the business you have acquired to protect your investment.

After the settlement, take necessary actions to secure your investment and ensure a smooth transition. Develop a post-acquisition integration plan, change locks, update details, and secure access to all assets and information.

Rachelle Hare - Blaze Business & Legal

Conclusion

Protecting yourself when buying a business requires careful consideration and proactive measures. Seek professional advice, particularly from a Commercial Lawyer who can guide you through the legal intricacies of the acquisition process. It is also beneficial to seek support from a Business Adviser.

Work with your Commercial Lawyer to conduct thorough due diligence, analyse the business's financial viability, understand the legal framework, and protect your interests through well-drafted contracts. Your Lawyer can also help you assess the business's assets, employee obligations, and intellectual property considerations. And communicate closely with your Lawyer during the settlement process and take necessary actions after settlement to secure your investment.

By following these steps and taking a cautious approach, you can navigate the acquisition process with confidence and protect yourself when buying a business.

Read our article about How to Protect Yourself When Buying a Business

Changed your mind and decided to start a business instead?

Read our article on how to Start a Business

And read all about funding your startup with our Ultimate Guide to Startup Funding.

FAQs

1. Should I rely solely on my own research when buying a business?

While conducting your research is important, it is highly recommended to seek professional advice from a Commercial Lawyer, Accountant, and industry consultants. They can provide valuable insights and guidance to help you make informed decisions.

2. How do I determine a fair purchase price for a business?

Valuing a business involves analysing its financial performance, market conditions, and future growth potential. Consult with business valuation experts who can provide an accurate assessment based on industry standards and comparable transactions.

3. What legal documents should I review during the acquisition process?

Key legal documents include the Purchase Agreement, Lease Agreement (if you are taking over the Lease), Non-Disclosure Agreement (this may be required by the Seller), and Non-Compete Agreement (if you want to prevent the Seller from competing against your business once you have purchased it). Have a Commercial Lawyer like Rachelle draft or review these contracts to ensure they protect your interests and minimise risks.

4. How important is due diligence before buying a business?

Due diligence is crucial to uncover any potential risks, financial issues, or legal disputes associated with the business. It provides a comprehensive understanding of the business's strengths and weaknesses, helping you make informed decisions.

5. What role does intellectual property play in a business acquisition?

Intellectual property, such as trademarks, patents, and copyrights, can add significant value to a business. It's essential to assess the ownership, protection, and potential infringements of intellectual property assets before finalising the acquisition. Make sure you also understand the social media profile of the business - an essential source of customers going forwards.

6. How can I ensure a smooth transition for the employees?

If you are taking over employees as part of the business purchase, there are additional steps you will need to take. Clear communication, transparency, and sensitivity are key to ensuring a smooth transition for employees. Develop a detailed transition plan (in cooperation with the Seller) and address any concerns or questions they may have during the process. Make sure you get proper Employment Contracts drafted up, and that you agree with the Seller (with your Lawyer's help) all of the employee entitlements and how they will be treated.

7. What actions should I take immediately after the settlement?

After the settlement, change locks, update your business details instead of the Seller's details, secure access to all assets and information, and develop a post-acquisition integration plan covering all the other steps you need to take. These steps will help protect your investment and facilitate a successful transition.

Let's chat about how we can
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Rachelle Hare and Shannon Drew, Blaze Business & Legal
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About the Author

Rachelle Hare

Rachelle Hare

Rachelle Hare is a highly experienced Construction Lawyer and Contract Lawyer, with over 23 years of experience in Tier 1 and Tier 2 Construction Firms, Top Tier Private Practice and Government.

With 23+ years of experience as a Senior Lawyer, Strategic Contracting Adviser and Management Consultant in Construction Law, Contracts, Major Projects, Commercial Advisory, Compliance, Procurement, Contract Management and Risk Management, Rachelle has the rare skills to offer you seamless business advice and legal advice to help support your organisation.


As well as a Lawyer and Business Adviser, Rachelle has also acted as a Strategic Procurement Adviser, Compliance Manager, Strategic Risk Adviser and Commercial Manager.

Rachelle owns
Blaze Business & Legal, a combined Commercial Law Firm and Business Advisory Firm located in Brisbane, Queensland, Australia. Blaze Business & Legal assists a broad range of clients in the Construction Industry and related industries, and advises owners, contractors, subcontractors, NFPs and other organisations on a broad range of Construction Law, Commercial Law, Business Advisory and Management Consulting issues in Brisbane, Queensland and around Australia.

Rachelle also owns Blaze Professional Learning, where she offers practical contracting skills, hands-on experience in drafting and working with contracts, and industry insights to help Professionals upskill and advance their careers with real-world skills.

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