How to minimise the risk of buying a wrong/underperforming business/company?

Acquiring a business/company involves identifying which business/company to acquire, how much to pay for it and how to integrate.

If you are a buyer, the following are some key questions to consider to minimise the risk of buying a wrong/underperforming business/company:

(1)        Financial Health and Independent Valuation

How is the financial health of the business/company – how is the valuation of the business/company by your in-house and/or independent valuer?

(2)        Legal, Tax and Compliance Issues

Are there any past or ongoing legal, contractual, tax and regulatory compliance issues, disputes or investigations?

(3)        Owner/Key Individuals Dependence

Is the business’ success heavily dependent on certain individuals including seller vs business/company – can the business/company run independently of the seller/key individuals?

(4)        Stakeholders’ Relationships and Dependence

How are the relationships/reputation of the business/company with its customers, bank, key employees, and suppliers?

Are there any over-dependence on a few major customers, key employees and suppliers?

Are there any repeat/long-term customers?

Any high turnover of employees?

(5)        Seller’s and Buyer’s Motivations

Why is the seller selling the business/company – is the seller serious in selling the business/company?

Why you want to buy this target business/company? At what price – what is your “walk-away” price? Why now?

(6)        Operational Processes and Systems

Does the business/company have proper and up-to-date documented processes and procedures, and systems?

(7)        Challenges

What are the biggest challenges facing the business/company today?

(8)        Industry Outlook

How is the industry (where the target business/company is operating in) doing as a whole?

What is the growth prospect for the business/company?

(9)        Competitive Landscape

How is the business/company doing when it stands against its competitors and the threats that it may face?

(10)      Transaction Pressure and Reluctance

Has the seller been desperately pressuring to complete the deal as quickly as possible, and why?

Any reluctance in providing the necessary information/documentation and assistance in transition/integration from the seller?

(11)      Seller’s Reputation

How is the character/reputation of the seller?

(12)      Seller’s Past Similar Transaction

Has the seller sold any similar business/company (which may potentially compete with the target business/company) before?

(13)      Ownership History

How long has the seller owned the business/company? Any high turnover of ownership?

The above serve as basic/general guidance to assist you to get a better overview into the business/company which you are considering to buy.

Ultimately, any verbal assurances from the seller should always be verified and confirmed by written documentation and independent sources/searches so it is always advisable to engage various qualified and independent advisors, amongst others, a qualified law firm to conduct proper legal due diligence/investigation on the business/company and advise you accordingly.

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This article dated 11 June 2025 is contributed by Maple Chieng (Corporate Commercial Lawyer) from Maple Chieng & Co. for general information only and is not a substitute for legal advice.  

Maple Chieng & Co is experienced in providing comprehensive services and support in M&A transactions across a variety of industries such as manufacturing, healthcare, technology, and food and beverage. Please refer our website at https://www.maplechiengco.com/ for further information.

If you have any specific queries or require advice/assistance, please contact us at maple@maplechiengco.com