Posted: Wednesday, 23 July 2008 @ 16:44
When it's a cat. Confused? So were the people who thought they were buying a piglet only to find that when they opened the bag (or poke) that there was a cat inside. This gave rise to the well known phrase 'buy a pig in a poke' meaning to purchase something without examining it first. It's also thought to be the origin of the phrase 'to let the cat out of the bag' meaning to reveal the secret.
Purchasing a business can be like buying a pig in a poke. Very often all you know about the business is what you have been told about it by the seller. It is incumbent upon you to 'look inside the bag' to check that what you are buying really is a pig. Even if you consider yourself a bit of an expert at buying pigs, it's also worth asking your accountant and your lawyer to have a look inside the bag as well just to make sure that the seller hasn't cunningly disguised their cat to look like a pig at first glance (this metaphor is running away from me fast now).
Not only will your accountant and lawyer be able to advise you when the business you are buying is different to what you were expecting (the accounts may be hiding some unpleasant surprises and the legal agreement may exclude certain parts of the business) they can also work together to make sure that where the seller has fraudulently misrepresented the value of the business that you have legal redress against the seller.
Remember though that it is easier to check out the business before you buy rather than sue the seller after you have bought. Money spent on due diligence is almost always well spent even if it means you walk away from the deal.
If you are about to purchase a business contact commercial property lawyer, Steve Petty, on 01926 629005.
Steve Petty, Commercial Property Lawyer
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