Acquisitions will typically involve the transfer of tangible assets such as inventory, machinery, buildings and vehicles and intangible assets such as shares and intellectual property rights. Due diligence can help ascertain which assets are actually included in a deal; whether the seller has the legal right to sell the assets in question; whether assets are subject to any charges or restrictions (for instance a mortgage or a right of usage granted to a third party such as an easement); and whether assets are in a satisfactory condition.
- Liquidity: how easily a business’ assets can be converted into cash. If a company is highly liquid, it can easily convert its assets into cash. This may be important if a bidder plans to sell some of the target’s assets post-transaction.
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By Jake Schogger - City Career Series