Increase Market Share
Companies often acquire other businesses in order to increase market share. The buyer may see opportunities to grow more rapidly by an acquisition. With rare exceptions, the financial and other information of the seller is incorrect. It may become difficult to lower the risk of the acquisition until a certain amount of due diligence is performed. The purpose of due diligence is to validate the information provided to a point where the buyer feels reasonably comfortable and understands both the risks and value of the purchase.
A business may be able to grow or be enhanced by buying the assets of another company, such as customer lists, contracts, trademarks, software, technology, patents, trade secrets, key vendors, key employees, copyrights, royalties, etc. The assets your company might wish to acquire may not be truly owned by the seller and/or may be encumbered by litigation, claims, unpaid royalties, unpaid taxes, debt, etc. Some of these assets may be owned my minority shareholders, employees, subcontractors or others. Due diligence may be required to minimize risk to the buyer.