Maybe your business already has a presence in other states and you would like to expand into California under an established brand name. Perhaps you have money to invest and think that purchasing a business might be a better fit for your needs than more traditional investments like stocks.

Regardless of the reason why you find yourself thinking about buying an existing business, it’s important that you take the time to familiarize yourself with the industry, the local players and the details of the business you think you might want to buy.

Business acquisitions are some of the most complex sales transactions that take place in California. Adequately protecting yourself requires that you do research before ownership changes hands.

Demand transparency regarding liabilities, assets and income projections

Some companies will provide you with a very brief report regarding their finances and expect you to simply take those figures at face value. However, acquiring a business will mean spending huge amounts of money and taking on liability in the process.

You should leave nothing to chance and demand specific information on everything from equipment to revenue so that you, an accountant or a business attorney can review the statements made by the business and affirm that their valuation reflects their current assets, liabilities and likely future revenue.

If your analysis of the figures does not match with the company’s asking price, you may be able to do your own analysis of the information as a tool during negotiations to reduce the price or secure more favorable terms for you as the purchaser.

Include clauses in the contract that ensure a smooth transition

Even if the financial figures provided all seem accurate and reasonable, a thriving and growing business could easily get thrown into chaos and wind up struggling or even going under during a massive overhaul of ownership and management.

Keeping the existing owners and executives in place during the transition to ensure proper training of new staff and management will help reduce the likelihood of the business struggling due to a learning curve on your part and the part of any professionals you bring into the company. Careful planning can go a long way toward making a business acquisition a much safer investment for you.