Due Diligence in Business Buy-outs

In the frenzy surrounding business buy-outs it’s easy to lose sight of the cost of taking-on the property from which the acquired business trades.

It is a massive step, to step into the boss’s shoes.  But make sure he doesn’t ‘fill his boots’ at your expense.

It is a business decision that requires your ‘Business head’ to be fully engaged.  Sentimentality must be allowed to fly out of the window.

Don’t be afraid to take independent advice from your own accountant and your own solicitor. You should also consider advice on the marketability of your offering and the potential for growth.   If a business stands still it will fall behind the rest; it’s got to move with the times.

As a business owner approaches retirement it’s all too easy to become complacent and sit in the ‘comfort zone’; the business can become stale.  There is no incentive to invest in the business and, as we know from experience, investment in the property usually takes a very back seat.

Fixtures and fittings become ‘tired’ and the the building falls in to disrepair.

When did you last walk around the back of your business premises?  Have you seen that leaking gutter and the weeds in the outlet?  When were the windows last painted?  That one looks rotten!  Why can’t I open this fire escape door?  Oops, it’s dropping to pieces.  Why is water running from that pipe and the brickwork below it perished?

The current owner has allowed all this ‘on his watch’ so why should you pick-up the cost of his years of neglect?

Dilapidation claims on rented property can run into many thousands of pounds.  Two or three times the annual rent is quite common.  And this is a cost that must not be ignored because it’s you who will be paying the bill.

And what does the lease say? Can the rent go up? When does the lease end? Can I renew it? Can I sub-let the spare room? Should the Landlord fix the roof?

Contact Chris Mills for property advice at chris@barlow-associates.co.uk

One Response to “Due Diligence in Business Buy-outs”

  1. From my perspective (marketing and business development) when working on business planning, the potential minefield of dilapidations and leases is unknown territory. But I can see it could be a deal-breaker! This is very enlightening.

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