Conducting research when buying a business

Employees, IT and environmental checks when buying a business

Responsibility to existing employees

One of the key considerations when thinking about buying a business is its existing employees. Normally a new business owner has to continue to employ the existing staff on their current terms and conditions under rules known as the Transfer of Undertakings (Protection of Employment) Regulations (TUPE). Understand your responsibilities to employees if you buy or sell a business.

Your main concern when assessing a business in the first instance is how much the current terms and conditions are going to cost on an annual or monthly basis. To do this you should:

  • Ask to see copies of employee contracts. However, you need to remember that these may differ for different levels of employee.
  • Look at employee costs such as the monthly wage bill, National Insurance contributions, pension contributions and any other benefits. This may include company cars, health insurance, gym membership, travel loans etc.

Remember any documents you see are highly confidential. Many of the business' employees may not know the business is up for sale. Once you have bought a business you need to comply with TUPE and other employment laws.

IT and other technology

A business' IT system is often vital to its smooth running. You will therefore want to consider how old any systems and equipment are and whether it is being sold as part of the deal. You will need to ask questions such as:

  • What is the value of the IT equipment and other technology?
  • Are these assets under guarantee?
  • What is included? Does it all belong to the business?
  • Are there ongoing IT maintenance and service agreements/contracts essential to the business?
  • What contingency plans does the business have in place for data loss? Does it have policies and procedures in place? Who has access to this data?

The environment

Another consideration will be the business' effect on the environment. Depending on the business sector it may have to pay environmental taxes and have other obligations in this area. If you think the business may be affected, contact the Northern Ireland Environment Agency (NIEA).