Do Some Due Diligence, Even with the Small Deals

Even with an acquisition of a very small business, some legal due diligence is worth your time and money.

Here are some things to take the time and effort to ask for, even in the ‘little’ deals:

1. Get full details and copies of all the legal docs on anyone who owns part of the business you are buying or who could claim they own part of that business, even when there are no formal, signed agreements in place. (You’d be surprised what pops up once you ask for this, like finding out that the “sole seller” of a business actually has a 50% partner who also needs to be included in the deal.)

2. If you are getting some potentially valuable IP as part of the acquisition, make sure the seller actually owns all the rights you expect to get, and that it’s not somebody else’s property.

3. Make sure any important customers or business partners of the business you are buying aren’t going to walk away after the business changes hands because their old pals are no longer involved. “Friends and family” investors and stakeholders may have a much larger influence on the business than you realize—and the ability to negatively influence the enterprise once those personal relationships to the business have dissolved.

4. If the business uses any critical service providers (classic example: offshore development team) you will need to keep using post-close, make sure everything is square and in place with that vendor and there are no hidden surprises (the seller had some big unpaid bills, etc.).