Javier had been looking for an investment opportunity for months.
This was not his first business venture. He knew the market, had experience and knew how to identify businesses with potential.
So when he met Andrés, everything seemed to fall into place.
The company had been operating for years, its results were positive, its client portfolio was stable and its growth prospects looked very attractive.
After several meetings, they began seriously discussing a potential acquisition. Everything was progressing as expected.
Or at least, that was how it seemed.
An opportunity too good to pass up
Excited at the prospect of closing a major deal, Javier began imagining the future of the company under his leadership.
The numbers added up.
The company had a good reputation.
And there appeared to be no significant problems.
However, before signing, he decided to carry out a comprehensive review of the transaction.
What is known in the business world as due diligence.
A decision that would ultimately change everything.
What the accounts did not reveal
At first glance, the company appeared to be in good shape.
But when the documentation was examined in detail, questions began to arise.
Several important contracts had not been properly formalised.
There were pending proceedings involving third parties that could result in future liabilities.
Certain corporate obligations had not been updated for years.
And some aspects relating to the company's intellectual property were not as clear as they initially appeared.
None of these issues would have become apparent during a simple business meeting.
Nor would they have appeared in a profit and loss statement.
But they could directly affect the true value of the transaction.
Buying a company means much more than buying a business
Many people believe that acquiring a company simply involves agreeing on a price and signing a contract.
The reality is very different.
When acquiring a company, the buyer may also assume risks, obligations and liabilities that are not always apparent from the outset.
That is why it is essential to analyse aspects such as:
The company's corporate and legal status.
Contracts with clients and suppliers.
Potential employment-related liabilities.
Outstanding tax obligations.
Intellectual property and technology.
Regulatory and compliance risks.
Because what is not reviewed before signing can become a problem afterwards.
The importance of due diligence
Due diligence is not there to complicate a transaction.
It is there to provide certainty.
Its purpose is to provide an accurate picture of the company and enable the buyer to make decisions with all the relevant information available.
In some cases, it confirms that the transaction is an excellent opportunity.
In others, it makes it possible to renegotiate certain terms.
And sometimes it prevents the buyer from assuming risks that could compromise the profitability of the investment.
The best deal is not always the one that looks most profitable
In Javier and Andrés's case, the transaction ultimately went ahead.
But not in the way initially planned.
The preliminary review helped identify certain risks, adjust the terms of the agreement and establish specific safeguards to protect both parties.
What initially seemed like a mere formality ended up becoming one of the most important stages of the entire negotiation.
Because a good investment is not simply about finding an attractive company.
It is about knowing exactly what you are buying.
Before signing, it is worth looking beyond the numbers
Behind many business acquisitions are legal considerations that can make the difference between a successful transaction and a future problem.
A thorough review can help identify risks, protect the investment and approach negotiations with a complete understanding of the business.
Are you considering buying or selling a company?
At Dr. Frühbeck Abogados, we advise companies, investors and corporate groups on acquisitions and disposals, due diligence, corporate transactions and complex commercial negotiations.
Because there is much more behind every transaction than numbers. There are strategic decisions that deserve to be made with the highest level of legal certainty.
👉 If you are considering an acquisition, a sale or bringing new investors into your company, our team can help you analyse the transaction before taking the next step.