When a buyer and seller agree the purchase price for a business, it is often at a relatively early stage in the transaction. Therefore, the buyer will make his offer for the assets subject to due diligence.
The reason for this stems from the common law principle of "buyer beware" (caveat emptor), which means that the buyer cannot adjust the purchase price post-completion of the transaction due to an issue about the business was that was unknown to him before completion (unless this is possible by way of a warranty claim).
Some buyers may take the approach of limited due diligence being required, other than establishing that the seller owns the assets in question, particularly in the case where any liabilities linked to the assets are to remain with the seller.
However, others may wish to engage in a more involved due diligence process and fully investigate the specific assets which make up the business. Areas that a buyer may focus on include property, environmental, financing arrangements and employees.
As part of the due diligence process it should be ascertained whether TUPE will apply and, if so, ensure that the pre-consultation obligations of the seller will be complied with.
The due diligence process can also assist with post-completion integration planning and is often a good starting point for the 100 day plan.