Buying a business is quite risky, especially if you don’t take precautionary measures. Why so? Let’s put this into perspective; when you buy a tangible asset such as a car or one of the beautiful pieces of real estate in Phuket, you can easily inspect the property (or hire a professional) to determine the value of what you’re buying. But when it comes to purchasing a business or similar complex asset, it’s exact value is not obvious. In business, there are many intangible items and possible hidden traps – what you see is not always what it seems.
This is where due diligence by a credible Phuket law firm comes into play. This informative article aims to guide buyers involved in business acquisitions or mergers on the importance of due diligence and how they stand to benefit from the legal process.
Legal Due Diligence Defined
Generally, due diligence refers to the activity, prudence, or level of judgment that a reasonable party is expected to perform under certain circumstances. But from the lens of corporate law, due diligence is the legal investigation carried on by a third party (such as a Phuket lawyer) on behalf of a client or a party intending to complete a business transaction such as a corporate merger or acquisition, and company obligations (potential lawsuits, contracts, warranties, debts, lease agreements etc.)
What is the Purpose of Due Diligence?
In a nutshell, the process of legal due diligence has three purposes that protect the buyer from potential legal risks as highlighted below:
- To uncover material information that the seller may not have disclosed intentionally or unintentionally. This requires a qualified Phuket law firm that can perform a thorough scrutiny of a business activity/transaction, and provide extensive insight into all applicable legal matters.
- To verify the legal accuracy and viability of the information provided. This allows the buyer to determine the actual status of the business and the consequences of an agreement.
What does the Buyer Stand to Gain?
By obtaining the services of a lawyer in Phuket, buyers stand to gain a lot from the business transaction (merger or acquisition). So, what’s in it for you as the client? Due diligence allows the buyer to obtain valuable information that may make or break the negotiations. Data on the target’s legal position helps you make informed decisions that guide your steps. What are the legal risks? Is the transaction a cost-effective transaction? These are all questions that are answered by the legal results from your Phuket law firm.
Due diligence is a critical and necessary step in business transactions. Your Phuket lawyer can help you verify the information provided by the seller and even uncover hidden information that is crucial to the deal. Are you planning on completing a business agreement in Phuket? Look for a lawyer with all the necessary tools and know-how of the documents needed and best practices.