Conducting due diligence is the most assured way to assess the value of a business or site and the associated risks with a purchase.
When you’re purchasing a house or vacant residential land block, the seller or real estate agent must provide copies of the site due diligence, so you, the potential buyer, can make a fully informed purchase decision and be made privy to any issues that could affect the property value, or impose restrictions should you choose to buy it. Solicitors are certainly heavily involved in the process noting easements and a large quantity of legal matters. The process is very consumer-protection driven.
However, the same cannot be said about large land parcels, an independent business, or a mine site, as it’s the purchaser’s responsibility to conduct due diligence research. All too often, when people are looking to purchase a vacant site, business, or mine site, they will jump ahead too quickly without conducting thorough research. Planners, Engineers, Solicitors and other specialists need to be involved at the right time.
As a purchaser, it is vital to conduct site due diligence, as a property with potential liabilities may be subject to reduced value, lower-than-anticipated profits from having to remedy the liabilities, lower-than-expected rental rates due to poor property quality, or the inability to dispose of or lease the property because of lack of clear title and other legacy problems. The ability to effectively manage these liabilities depends upon the early identification of the problem.
I have lost count of how many times I have seen old waste landfills that are not located in the right title, pipes that have been located outside of the easement, the remediation costs of waste or mine site being grossly understated, or paddocks that seems to have relatively sparse trees on a map, only to see protected vegetation on site. All this can be managed with due diligence.
However, there are instances where companies have saved significant funds through detailed assessment and diligence. For instance, many activities including mining and waste as well as other industrial development require an environmental bond or financial assurance be given to the government agency. It can be argued that the calculations of some financial assurance are rather ‘loose’. Thus, a purchaser may find that once secured, a small remediation or program may result in the financial assurance being significantly lowered, creating equity for the licence holder. However, this can be a cumbersome process but ultimately fruitful. Examples have included rehabilitation of degraded lands, treatment of water, or use of the land (void) for another purpose.
Harbak is currently involved in several due diligence checks for a variety of clients. Our team are not specialists, however, we are experienced in commercial, planning and environmental matters. We have experience in waste, mining and property.
Our team offers something a little different in that we operate interactively with our client during the process. This works by both parties collecting the data and check as well, as we do undertake stakeholder consultation to ensure we hear what is happening locally. A land parcel may be vacant for a reason that is not shown on normal searches.
Keiran Travers is the Founder and Director of Harbak. The company provides Business Management, Business Match-Making (Business Development) and Advisory Services. Harbak offers business match-making services for small to medium-sized businesses who are wanting to consolidate their existing clientele and grow their business connections and opportunities. Harbak can facilitate low-risk introductions with key industry stakeholders and find hidden revenue opportunities to drive business growth. Contact https://harbak.com.au/contact