Due Diligence & Good Faith

Negotiations are complete and you have the seller’s initial commitment to go through with the deal. Howevere, once the deal is done, there are certain consequences for both parties.

Before you can close, both sides of the transaction need to do their homework on matters ranging from environmental impact to taxes to debt. This period of “doing your homework” is generally referred to as “due diligence.”

Just as important as completing your own due diligence is providing information to the seller or meeting various conditions of the deal in good faith. This is no time for pulling one over on the other party. Both sides need to be honest with one another and make a whole-hearted attempt to get all the loose ends tied up prior to closing.

If you believe that the seller is not acting in good faith at this stage of the process, it may be time to reconsider purchasing this business. Who knows what liabilities or bad reputation may be attached to this business as a result of this character trait. Of course, the seller will be asking the same about you if you aren’t acting in good faith in the other direction.

Next Step: Close the Deal


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