Due diligence is a crucial method of evaluating a company that’s up for sale. It includes everything from legal to financial operational to environmental. Due diligence is required for two types of transactions: selling a company and merging or acquiring another. Each type of transaction has its own complexities that can prolong the duration and intensity of the process.
Determine Your Needs
Due diligence can reveal many potential risks that could cause problems in a deal. It is crucial to organize and set your priorities. You must also know how the due diligence results can affect your deal as well as the terms you provide. Do they depend heavily on two or three clients? Do you see customer churn in the future? Take a look at these questions to help you set expectations prior to speaking with the vendor.
Be prepared to be thorough
Individual buyers are usually less thorough than companies when conducting due diligence. This is partly due to their personalities (e.g. they might be cautious and apprehensive) and also due to the fact that they rely on professional advisors with their own hourly rate fees. However making preparations for the due diligence process as soon as you can increases your chances of selling quickly and successfully.
To streamline communications and decrease the number of reviewers who have access to information, designate one person as the point of contact. This will help you avoid delays and ensure that all issues are addressed and resolved in a timely manner. Furthermore, it will make it easier to convince the buyer to shorten the due diligence period in the event that you’re prepared and organized to begin.