Newsletters

Tabak Newsletter - July 2026

Getting the Sale over the Line

By the time an offer is made and accepted for a business both purchaser and vendor will have invested considerable time, and often money on advisors, on the purchase/sale. The last thing either party wants is for the sale to fall over in due diligence, so we have outlined below the most common Due Diligence & Purchase Conditions that can be problematic, so buyers can get ahead of the game and prepare appropriately for these.

Finance

If you are unable to fund the business purchase and working capital, with money that you have readily available, then some form of borrowing will be required. Please talk with your bank and/or finance broker before you even start to look for business opportunities, as without good, solid advice around your borrowing capacity, you will not even know what your purchase budget is. Banks will not formally offer you a funding package until you present them an executed SPA and funding request, but they should be able to provide a reasonably indicative idea of your borrowing capacity early in the purchase process. It is not uncommon for a sale to fall over due to last minute funding issues, where appropriate background and positioning work has not been completed. Moreover, you don’t want to be scrambling for vendor finance or more expensive second-tier lending at the last minute, if you can help it.

Solicitors

Both buyer and seller need to work with their respective solicitors – that is a given, and Tabak strongly advise that you do not enter the buying/selling process trying to skimp a few dollars on the legal bill. Whilst most solicitors are pragmatic, realistic and “deal-enablers”, unfortunately there are some who either delegate to inexperienced junior staff, or who try to implement a “win-lose” strategy when reviewing contractual arrangements. We see a number of sales fall over or cost one or both parties significant legal fees & delays, when one or both solicitors’ approaches have been inappropriate. By the time each solicitor reviews the SPA, agreement will have been reached between the two parties on the commercial terms. If this is the case, then each party needs to try and stick to the terms agreed, and not try to “screw the scrum” on the possibly well-meaning, but potentially inappropriate advice re certain clauses, terminology, restraints of trade, lease reassignments or changes etc.

Vendor Warranties

The standard ADLS Sale & Purchase Agreement has significant Vendor Warranties in Clauses 6.1 to 6.6. For the most part these will be sufficient to protect a purchaser’s interests. Be very wary if your solicitor wants to bulk out the vendor warranties inherent in the standard terms, with significant additional warranties in the Further Terms – this may not be well received by the vendor or their solicitor.

Lease of Premises

Whilst Landlord’s cannot unreasonably withhold consent for the assignment of the lease, some may try to either rewrite the lease or add extra time on or increase the rent outside of a rent review period. Or a buyer may try to do the same when it is potentially not appropriate. There is also an assumption that a lease reassignment is a box-ticking exercise that can be left until the last minute – but it cannot, as a buyer must give the landlord sufficient time to review their statement of financial position prior to the reassignment. A bank will not confirm funding until the lease reassignment is confirmed, so please ensure that the lease condition is addressed by ALL parties as early as possible.

Key Employees or Customers

If there is 1 or 2 staff or a key client that are critical to the business, then agreement should be reached with the vendor that you have the right to talk with these staff or client prior to confirmation. However, this must be the final thing you do within DD once you have confirmed all other conditions of sale and this needs to be addressed at the time the SPA is being drafted, not as an after thought once the SPA has been executed.

The above are probably the most common cause of issues within due diligence, so get across them early and you will be a long way down the track of a trouble-free confirmation of your business purchase.

Damien Fahey; Partner
Tabak Business Sales, Christchurch