Buying another business or practice? Always do your research.

| May 21, 2019 | Business Law

As your business or professional practice grows in size and profitability, you may be interested in expanding by buying a similar operation to your own. This can be a great way to take on additional professionals and staff members, gain new facilities and locations and profit from the good will that comes with the existing business you are buying.

But as with any large purchase or acquisition, it is critical to conduct thorough research and to learn about all of a business’ liabilities as well as its assets. A recent series of news stories shows just what can go wrong when one company buys another, apparently without a full assessment of risks.

In 2018, German pharmaceutical giant Bayer purchased Monsanto, maker of genetically modified seeds and other agricultural products. The merger cost $63 billion and probably seemed like a bargain in light of Monsanto’s history of success and profitability.

But in recent months, Monsanto (and now Bayer) have lost three lawsuits in California alleging that exposure to Monsanto’s herbicide Roundup causes non-Hodgkin lymphoma and other serious health issues. The first two lawsuits resulted in jury awards totaling tens of millions of dollars each. The most recent lawsuit, filed by a husband and wife who both developed the same type of cancer, ended with an award of $2.055 billion. That figure is astonishing, and it could be a sign of trouble ahead, considering that the company is facing another 13,400 lawsuits in the U.S. alone.

Investors and shareholders in Bayer are questioning the wisdom of the decision to purchase Monsanto, and many believe that management did not investigate carefully enough.

Obviously, this example is of a larger scale and dollar value than any small business owner will face. However, it is nonetheless a cautionary tale about taking the time to carefully examine your acquisition before buying it. Whether you are a dentist buying up another practice or a small business owner buying out a competitor, you’ll need to examine all financial and legal records to ensure that the business’ future looks as bright as its past and present.

As you contemplate making any change to your business or professional practice, it is a wise investment to seek the help of an experienced business law attorney. Spending time and money now could save you from an unaffordable amount of time and money in the future.