Tool Box

Issue No. 46 - April/May 2009

Business

Business purchase checklist

by Allen Bolaffi

Current economic conditions have changed the dynamics of business acquisitions and sales and vendors and purchasers need to abide by the new rules of engagement.

The past few years have seen fair values and fair earnings multiples go out the window.

The global credit crisis and the general slowdown we are currently experiencing has brought everyone back to basics. So what are the new rules of engagement for purchasers? What are questions they need to be asking? How do they manage the risk of buying a dud business?

1. Look at the current year turnover and examine whether this is sustainable in the current environment

2. Have the profits of the past three years been enhanced by a strengthening Australian dollar? If so, what impact has the collapse in our dollar had on the gross margins of the business?

3. If you had to retrench, what would the cost be for any redundancy packages under current or proposed legislation? Remember, a platform of the current go...

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