Resort Support

So what exactly is this “due diligence” we’ve all been twittering on about when we talk about buying a scuba diving business? Seems very uptight and accountant-speak to most of us and about as interesting as my Auntie Mildred’s boil on her…, yes well you get the idea…

Simply put, performing due diligence means taking an extremely good scrutinizing look at the business to see if it holds muster and actually IS what it claimed to be before you made the offer. The basic translation is:

“Has the Seller told the truth in regards to how big the business is and how much money they make, or have they told porkie-pies in the MoS or Financial Highlights”

Now the next thing is that the Seller will only give you what you ask for… indeed there’s the rub, you really do need to know what to ask for at this stage and once you’ve got it, know what you’re looking at.

They are not going to willingly give you things you haven’t asked for. They have an offer on the table that they have accepted and they want to get this done as fast as humanly possible

For 90% of us this means employing an Accountant to look at (yes a real one, not just your mum who does your dad’s small business books..)

The things you need to look at during this stage when you have made the offer. I’d break it down into things that you can do and things that you really want your Accountant to do

Your Accountant

For a good feeling of the financial situation of the scuba diving company ask for the last three years worth of:

  • Contracts for sale of the business (prob fairly bog-standard)
  • Financial records
  • financial performance
  • P&L
  • Bank statements (all bank accounts!)
  • Tax returns
  • Proof of past sales
  • Proof of past purchasing
  • Current balance sheet
  • Payroll and remuneration amounts for all staff

Your Work in all This

Now chances are that you will be better qualified and in a better position than any accountant to asses these items. (Not to say that you shouldn’t be giving these items and info to your Accountant also)

  • Employment contracts and remuneration amounts for all staff
  • Property Leases or titles
  • Lease and rental agreements for any equipment and assets
  • Stock levels (as recent as possible)
  • Asset register (check what is claimed is actually there)
  • Customer contracts (talking travel agents, dive wholesalers)
  • Supplier contracts
  • Joint venture and partnership agreements (hotel concessions?)
  • Trademark registration (see if that lovely logo is secure…)
  • Insurance policies
  • Pending quotations
  • Customer database
  • Any advance payments received
  • how the business actually operates,
  • who their customers are (hotel guests or walk in from street)
  • how they get their customers (advance bookings or walk in point-of-sale?)
  • supplier relationships
  • competition information

Wow! Now there’s a PILE of work huh? Yeah no sh#t! This is sure to take the shine out of that lovely Honeymoon feeling, lol!

Hotel and Resort Contracts

One of the things to remember in looking at all the current contracts of the company is that many of the customer contracts , talking concessions to hotels and resorts, normally have a clause in there that says something like this:

“…if the concessionary changes ownership, then this contract ends…”

What this means is that your new company will have to re-contract with all these customers. This is normally not a major issue, as all it normally takes is a visit to the General Manager of the hotels hand-in-hand with the previous owner to ‘resign’ the contracts.

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