Preparing for Due Diligence

When selling your business, the due diligence process can be an intimidating undertaking. We set out below a few thoughts on things owners and shareholders can do to minimise the disruption and avoid unnecessary stress during the later stages of a sale process.

1. PLAN AHEAD

  • Getting an efficient finance function in place, even if small and simple, will save you a lot of pain in the due diligence process and can help to protect value during the negotiations stage.
  • Properly prepared historical financial information will give due diligence teams less scope to propose significant adjustments which can affect the purchaser’s level of confidence in the business’ track record.
  • Ensuring all relevant historical legal and commercial documents (articles of association, client contracts, supplier agreements, tax returns etc.) are stored in an orderly fashion to enable them to be quickly shared with the buyers as required can streamline DD timelines.
  • Simplifying the legal structure of your business, where possible, can minimise time and costs incurred, as buyers don’t have to consider multiple entities with different shareholding structures during the course of due diligence.

2. IDENTIFY THE BUSINESS’ KPIS

  • Focusing on preparing regular Management information in a format that is consistent with how the business is presented to potential purchasers will save you time and effort during a DD process.
  • Detailed breakdowns of revenue by client and service line that match the manner you speak about the business in meetings helps buyers / investors / DD providers to understand the business more quickly.
  • It may be useful to have an experienced M&A advisor look over your financial information who can suggest how a buyer may look to analyse your business.

3. MAKE SURE THE ADVISORS YOU SELECT HAVE SUFFICIENT TRANSACTION SPECIFIC EXPERIENCE

  • Negotiating on behalf of a seller is a distinct skill to providing on-going strategic support.
  • Ensuring your financial and legal advisors have the experience and capacity to move at the fast pace required by an M&A process can provide confidence to the buyers that you are committed to completing the transaction.

4. HAVE A CLEAR VISION FOR THE FUTURE

  • It is rare that any buyer would have as much knowledge and insight into the relevant markets as the founders of the target business.
  • With the help of M&A advisors, crafting a narrative for the future growth potential of the business, supported by demonstrable prior performance, that clearly sets out the scale of the opportunity can help to drive buyer interest.

5. ACCEPT THAT IT WILL EAT INTO MANAGEMENT TIME

  • Even the best planned and most efficient due diligence processes won’t always feel that way as they are happening.
  • Accepting that additional hours may be required up-front can help to set expectations and prevent frustrations at the point you are making key negotiating decisions with the purchasing party.

Find out more about what we do here.

If you’re looking to sell your business, raise funds, or have a question about M&A, our team are here to help. Call 020 3314 8191 or email [email protected] to speak to our team.

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