Buying an Entity
Nowadays, it is becoming an increasingly preferred method for large companies to purchase existing companies instead of establishing a new company to make new investments or head to new sectors. Based on this preference, there are reasons such as follow:
- &The much recognition of an existing company compared to a new company
- &The high cost of an establishment according to the countries
- &The presence of experienced personnel trained in the company
- &The advantage of using the company’s past experiences for future business
However, the biggest fear of individuals and organizations who want to acquisition is that the obligations and risks of the entity can not be fully understood. This situation is something like to know of severely damages after purchasing of the second-hand vehicle, which was said to be perfect.
Are the debts of the business you want to buy exactly as explained to you, do the business really have an indorsement as you were told and is profitability correct, do the assets shown to you (receivables, inventories, tangible assets and etc.) really exist, are there any conditions restricting the use of pledges, mortgages or similar use on them?