Buying a Business in a pandemic – What questions should you be asking?

When buying a business, the purpose of due diligence is to enable a potential buyer to see the assets and liabilities that the business has and therefore what the potential buyer would be liable for if purchasing the business. Although Covid-19 hasn’t changed the purpose of a Due Diligence Questionnaire, it has made asking certain questions more important so that a buyer is fully appraised of risks, and in some cases benefits (noting these could be short lived) relating to the impact that Covid-19 may have had on the business.

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Before proceeding with any acquisition, I would strongly recommend any buyer consider the following:

Staff

1. Were staff levels effected by Covid-19?
2. Did the business make use of the government’s job retention scheme (furlough)?
3. Did staff have a reduction in pay?
4. Were any staff made redundant?

Accounts

5. How are the accounts looking compared to previous years?
6. Was the business affected favourably or adversely by the pandemic?
7. Have sales been effected either way?
8. How did the particular business perform against similar competitors in the market?

Loans

9. Does the business have any additional loans or debts caused by COVID-19? In particular, has the company made use of any government support including CBILS?
10. What would be the impacts of failure to pay these back be and can the business afford it?
11. What where the terms of those loans?
12. What security was given?
13. Have the loans been used for the purpose that they were intended?

Operation of the Business

14. Did COVID-19 impact the way the business interacts with clients? Did meetings turn from face to face to online?
15. Was the business forced to make closures of departments?
16. Has the supply chain been effected?
17. What health and safety procedures have been effected to ensure that the business is ‘Covid-Secure’

Property

18. Has the business changed the way and where it operates from?
19. Are there any liabilities in respect of previous properties?
20. Where are the properties located and are there any ongoing risks of lockdowns?

The above is a brief overview of some of the considerations you should have as a buyer. By raising these additional questions and others, you can ensure you are fully appraised of the possible risks with the business you are buying, allowing you to cover any key concerns off in the contract, consider how you will address identified risks moving forwards and ultimately plan for a successful acquisition.

For further information and to find out how we can help, contact our Business Services Team on 01604 828282 / 01908 660966 or email BusinessServices@franklins-sols.co.uk.