{"id":1169,"date":"2020-12-13T12:32:52","date_gmt":"2020-12-13T12:32:52","guid":{"rendered":"http:\/\/nz.legalvision.com.au\/?p=1169"},"modified":"2026-01-16T15:05:31","modified_gmt":"2026-01-16T02:05:31","slug":"5-tips-when-purchasing-a-business-in-new-zealand","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/corporations\/5-tips-when-purchasing-a-business-in-new-zealand\/","title":{"rendered":"5 Tips When Purchasing a Business in New Zealand"},"content":{"rendered":"\n<p>If you want to&nbsp;<a href=\"https:\/\/legalvision.co.nz\/business-structures\/starting-a-small-business-in-new-zealand\/\">run your own business<\/a>&nbsp;but feel intimidated by the high rate of failure that startups experience, you can look into purchasing an existing business. You can find businesses for sale in New Zealand on online platforms like&nbsp;<a href=\"https:\/\/www.realestate.co.nz\/\">realestate.co.nz<\/a>,&nbsp;<a href=\"https:\/\/www.nzbizbuysell.co.nz\/\">NZ BizBuySell&nbsp;<\/a>or&nbsp;<a href=\"https:\/\/www.trademe.co.nz\/a\/marketplace\">Trade Me Marketplace<\/a>. Alternatively, you can instruct a broker to source potential acquisition opportunities. Before you make an offer, you need to carefully research the business and do your due diligence to ensure you are paying a fair price. This article lists some key points and tips to help you make an informed decision when purchasing a business in New Zealand.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Before You Buy&nbsp;<\/h2>\n\n\n\n<p>Purchasing a business can greatly impact your life. Therefore, you should not entertain the decision lightly. Before making an offer, you need to:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>understand the type of business you are buying;<\/li>\n\n\n\n<li>research the target business\u2019s market, suppliers and competitors;<\/li>\n\n\n\n<li>conduct due diligence before you sign the&nbsp;<a href=\"https:\/\/legalvision.co.nz\/property-and-leasing\/legal-considerations-sale-and-purchase-agreements\/\">sale and purchase agreement<\/a>&nbsp;(or make it conditional on the satisfaction of a due diligence investigation);<\/li>\n\n\n\n<li>register your formal interest in buying the business with the person appointed to manage the sale;<\/li>\n\n\n\n<li>engage a professional adviser (a lawyer or accountant) to represent you; and&nbsp;<\/li>\n\n\n\n<li>ask as many questions as possible about the business to determine whether any underlying issues could impact your revenue post-sale, such as the potential loss of critical customers.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>If you are&nbsp;<a href=\"https:\/\/legalvision.co.nz\/franchising\/how-to-set-up-a-franchise-in-new-zealand\/\">buying a franchise<\/a>, be wary of large upfront fees or being rushed to buy in. You may be entitled to a seven-day cooling-off period after signing your franchise agreement if your franchisor belongs to the Franchise Association of New Zealand. Franchise agreements can be complicated, so it is best to get legal advice before signing. Alternatively, you could get free advice from the Franchise Association of New Zealand. Before you buy a franchise, you should ask:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>for a disclosure document that outlines the company\u2019s history and track record; and&nbsp;<\/li>\n\n\n\n<li>how you are required to pay ongoing costs such as advertising and stock.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">1. Do Not Skimp on Your Due Diligence<\/h2>\n\n\n\n<p>No matter how tedious or boring, you should never skimp on your&nbsp;<a href=\"https:\/\/legalvision.co.nz\/business-sale-and-purchase\/due-diligence-business-sale\/\">due diligence when purchasing a business<\/a>. This process helps you determine whether the business is profitable and whether the vendor\u2019s estimates and projections are over-optimistic. To conduct due diligence on the business, you should check:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>if the business has any pending court cases or legal disputes;<\/li>\n\n\n\n<li>if it owns all key business assets, including critical intellectual property;<\/li>\n\n\n\n<li>all contracts, including employment, sales, supply, rent and service levels agreements; <\/li>\n\n\n\n<li>if crucial staff members, customers and suppliers are loyal to the current owner; and<\/li>\n\n\n\n<li>if all relevant relationships are subject to robust contractual arrangements.<\/li>\n<\/ul>\n\n\n\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        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Get Legal Advice Before Purchasing the Business<\/h2>\n\n\n\n<p>From employment to sales and supply contracts, there are several legal agreements involved in purchasing a business. You should get legal advice to review any clauses or agreements that are confusing or unfamiliar to you. Seeking legal advice will ensure that you do not miss any crucial details.&nbsp;<\/p>\n\n\n\n<p>Your lawyer can also provide you with legal advice on how to structure the transaction, including any changes required to the legal agreements. They can help you mitigate your risk by:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>utilising vendor warranties (and advising on any proposed limitations on liability);<\/li>\n\n\n\n<li>considering your purchasing vehicle and whether a new company (&#8216;SPV&#8217;) needs to be set up; and <\/li>\n\n\n\n<li>navigating employee transfer processes (and relationship management).&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">3. Engage an Independent Valuer<\/h2>\n\n\n\n<p>You can attempt to value the business yourself, but you need to ensure you have access to the right information.<\/p>\n\n\n\n<p>There are some standard valuation methodologies used for valuing a business, which your accountant or an independent valuer will be able to assist you with. Getting it right draws on multiple disciplines, including financial statement analysis and market economics. <\/p>\n\n\n\n<p>Ultimately, the valuation of the business is set by the market at the relevant time. While a formal valuation is useful as a starting point, the actual sale price will be set by how motivated&nbsp;the seller and buyer are and the strength of their respective negotiating&nbsp;positions.<\/p>\n\n\n\n<div  class=\"box box--icon box--star\">\n    <p>An independent valuer can help you assess the business\u2019 value to ensure that your vendor is not asking for an inflated purchase price.<\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">4. Consider a Gradual Handover After Purchasing the Business<\/h2>\n\n\n\n<p>Some owners prefer a gradual handover where you pay off the sale price from your profits. This option reassures them that you, as the buyer, will make a success of the business. Therefore, you should discuss this option with your vendor, especially if they seem reluctant to sell or as a way to negotiate down the price.&nbsp;<\/p>\n\n\n\n<div  class=\"box box--icon box--idea\">\n    <p>You should discuss this option with the vendor, particularly if they appear reluctant to walk away or are emotionally attached to the business. It can also be a useful negotiation tool to reduce the upfront cost or build in performance-based milestones.<\/p>\n<\/div>\n\n\n\n<p>In some cases, the seller may agree to stay on for a transitional period to provide training or maintain key relationships. It is essential to document these arrangements clearly in the sale and purchase agreement, including the duration of the handover period, the seller\u2019s specific responsibilities, and any remuneration. Your lawyer should draft appropriate restraint of trade and confidentiality clauses to protect the business during and after the transition. <\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>Consider the impact on staff, customers, and day-to-day operations when structuring these arrangements.<\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">5. Agree on How to Manage the Business Restructuring<\/h2>\n\n\n\n<p>If the target business has employees, you should decide whether you will take over their employment and include this in your sale and purchase agreement. If you choose not to keep the existing staff, the seller must handle any redundancies before you take over.<\/p>\n\n\n\n<p>The&nbsp;<a href=\"https:\/\/www.employment.govt.nz\/workplace-policies\/workplace-change\/workplace-change-process-outline\/\">Employment New Zealand website<\/a>&nbsp;provides some guidelines to follow when restructuring a business. This process will depend on:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>the existing employment agreements;<\/li>\n\n\n\n<li>the size of the business; and&nbsp;<\/li>\n\n\n\n<li>whether the business employs vulnerable workers.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>You can find out more about employee protection provisions in the&nbsp;<a href=\"https:\/\/eab.business.govt.nz\/employmentagreementbuilder\/startscreen\/\">Employment Agreement Builder<\/a>.<\/p>\n\n\n    <div class=\"my-7 lg:my-10 border-y-2 border-gray-100 py-7 lg:py-10 flex flex-col sm:flex-row items-start gap-10\">\n                    <img decoding=\"async\" class=\"w-52 mx-auto my-0! rounded\" src=\"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/2\/2021\/10\/28131832\/how-to-sell-your-business-guide-_-560x792-1-e1635392481928.png\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\">How to Sell Your Business in New Zealand<\/div>\n            <div class=\"body-text\">\n                <p>Looking to sell your business? This free guide will help you to understand the moving parts that impact a successful sale. <\/p>\n            <\/div>\n            \n\n<a href=\"https:\/\/go.legalvision.co.nz\/guide-to-selling-your-nz-business.html\" class=\" block px-5 py-3.5 max-w-fit bg-orange button__hover transition rounded text-white font-bold text-lg no-underline uppercase leading-tight text-center\" target=\"\" rel=\"\">Download Now<\/a>        <\/section>\n    <\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\">Key Takeaways&nbsp;<\/h2>\n\n\n\n<p>If you want to purchase a business in New Zealand, it is essential to register your formal interest with the person managing the sale. However, before locking yourself into the purchase, carry out thorough due diligence to uncover any legal, financial, or operational risks to ensure you are making an informed decision.&nbsp;<\/p>\n\n\n\n<p>An independent valuation will help ensure the price is fair and grounded in market realities. Ensure the agreement includes appropriate protections, such as:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>warranties;&nbsp;<\/li>\n\n\n\n<li>indemnities; and&nbsp;<\/li>\n\n\n\n<li>conditions that reflect the results of your due diligence.<\/li>\n<\/ul>\n\n\n\n<p>LegalVision provides ongoing legal support for New Zealand businesses through our fixed-fee legal membership. Our experienced lawyers help businesses manage contracts, employment law, disputes, intellectual property and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision\u2019s legal membership, call <a href=\"tel:+64800005570\" class=\"AVANSERnumber dynamic-number\">0800 005 570<\/a> or <a href=\"https:\/\/legalvision.co.nz\/membership\/\">visit our membership page<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Frequently Asked Questions<\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1606880228344\"><strong class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>Is buying an existing business a good idea?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong> <p class=\"schema-faq-answer\">If you want to avoid going through the challenges of the startup phase, you should consider buying a business. Some other advantages of purchasing an established business include immediate cash flow, existing employment and supply contracts, and the ability to leverage the previous owner\u2019s experience.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1606880271477\"><strong class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>How do you conduct due diligence when purchasing a business?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong> <p class=\"schema-faq-answer\">When you conduct due diligence (either before you sign the sale and purchase agreement or after signing, provided a due diligence condition has been included), you need to analyse your financial position and legal obligations, amongst other things. Depending on the complexity of the business and your previous experience as a buyer, you may need to engage a lawyer, accountant and\/or independent valuer to complete your due diligence.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1606989773267\"><strong class=\"schema-faq-question\"><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong><strong>How do you determine if a business is worth buying?<\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong><\/strong> <p class=\"schema-faq-answer\">There are various methods for valuing a business, but getting it right draws on multiple disciplines, including financial statement analysis and market economics. You can conduct a valuation in-house using a standard method, but you risk falling short by not considering growth and risk and how these two factors are related. Therefore, you should engage an independent valuer to help you assess whether the business is worth buying.<\/p> <\/div> <\/div>\n<div class=\"not-prose m-feedback-prompt\">\n    <!-- Thumbs up\/down bar -->\n    <div class=\"m-feedback-prompt__main\">\n        <div class=\"m-feedback-prompt__title\">Was this article helpful?<\/div>\n        <div>\n            <!--span class=\"m-feedback-prompt__button--text\">Thanks!<\/span-->\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--yes\"\n                    data-analytics-link=\"feedback-prompt:yes\" aria-label=\"Agree\">\n                <i class=\"fa-regular fa-thumbs-up fa-3x\"><\/i>\n            <\/button>\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--no\"\n                    data-analytics-link=\"feedback-prompt:no\" aria-label=\"Disagree\">\n                <i class=\"fa-regular fa-thumbs-down fa-3x\"><\/i>\n            <\/button>\n        <\/div>\n    <\/div>\n\n    <!-- Feedback form -->\n    <div class=\"m-feedback-prompt__form\">\n        <div class=\"m-feedback-prompt__form--thanks \">\n            <div>Thanks!<\/div>\n            <p>\n                We appreciate your feedback \u2013 your submission has been successfully received.            <\/p>\n        <\/div>\n        <form id=\"contact-form\" class=\"m-feedback-prompt__form--form\" action=\"\" method=\"post\">\n            <input type=\"hidden\" id=\"authenticity_token\" name=\"authenticity_token\" value=\"3bc3beddae\" \/><input type=\"hidden\" name=\"_wp_http_referer\" value=\"\/api\/wp\/v2\/posts\/1169\" \/>            <input value=\"https:\/\/legalvision.co.nz\/corporations\/5-tips-when-purchasing-a-business-in-new-zealand\/\" type=\"hidden\" name=\"currenturl\"\n                   id=\"currenturl\">\n            <input value=\"5 Tips When Purchasing a Business in New Zealand\" type=\"hidden\" name=\"currenttitle\"\n                   id=\"currenttitle\">\n            <label>\n                <!-- display on thumbs-up -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--yes\">\n                    Can you tell us <span class=\"font-semibold\">why<\/span> you found it helpful?\n                <\/span>\n\n                <!-- display on thumbs-down -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--no text-lg\">\n                    How can we better improve this article?\n                <\/span>\n                <textarea name=\"feedbackmessage\" id=\"feedbackmessage\" required><\/textarea>\n            <\/label>\n\n            <div class=\"m-feedback-prompt__form--error\" id=\"form-submit-error\"><\/div>\n            <button id=\"submit-contact-form-button\" type=\"submit\" name=\"commit\" class=\"m-feedback-prompt__form--submit\"\n                    data-analytics-link=\"feedback-prompt:submit\">\n                Submit            <\/button>\n        <\/form>\n    <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>If you want to&nbsp;run your own business&nbsp;but feel intimidated by the high rate of failure that startups experience, you can look into purchasing an existing business. You can find businesses for sale in New Zealand on online platforms like&nbsp;realestate.co.nz,&nbsp;NZ BizBuySell&nbsp;or&nbsp;Trade Me Marketplace. Alternatively, you can instruct a broker to source potential acquisition opportunities. Before you<a href=\"https:\/\/legalvision.co.nz\/corporations\/5-tips-when-purchasing-a-business-in-new-zealand\/\">Continue reading <span class=\"sr-only\">&#8220;5 Tips When Purchasing a Business in New Zealand&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13550,"featured_media":921,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"1205,153,202223,1559,219097,1176","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[14],"tags":[35,54,151,152],"class_list":["post-1169","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-corporations","tag-due-diligence","tag-medium-business","tag-business-purchase","tag-business-valuation"],"acf":[],"yoast_head":"<!-- This site is optimized with the 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idea?","acceptedAnswer":{"@type":"Answer","text":"If you want to avoid going through the challenges of the startup phase, you should consider buying a business. Some other advantages of purchasing an established business include immediate cash flow, existing employment and supply contracts, and the ability to leverage the previous owner\u2019s experience.","inLanguage":"en-NZ"},"inLanguage":"en-NZ"},{"@type":"Question","@id":"https:\/\/legalvision.co.nz\/corporations\/5-tips-when-purchasing-a-business-in-new-zealand\/#faq-question-1606880271477","name":"How do you conduct due diligence when purchasing a business?","acceptedAnswer":{"@type":"Answer","text":"When you conduct due diligence (either before you sign the sale and purchase agreement or after signing, provided a due diligence condition has been included), you need to analyse your financial position and legal obligations, amongst other things. Depending on the complexity of the business and your previous experience as a buyer, you may need to engage a lawyer, accountant and\/or independent valuer to complete your due diligence.","inLanguage":"en-NZ"},"inLanguage":"en-NZ"},{"@type":"Question","@id":"https:\/\/legalvision.co.nz\/corporations\/5-tips-when-purchasing-a-business-in-new-zealand\/#faq-question-1606989773267","name":"How do you determine if a business is worth buying?","acceptedAnswer":{"@type":"Answer","text":"There are various methods for valuing a business, but getting it right draws on multiple disciplines, including financial statement analysis and market economics. You can conduct a valuation in-house using a standard method, but you risk falling short by not considering growth and risk and how these two factors are related. 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