Understanding And Preparing For The Due Diligence Process

October 23, 2021

The acquisition process is tedious.  Buyers will want every piece of information they can gather regarding your business, and yet you still have to run your business and want to make sure you don’t create stress among your employees by revealing the possibility of a sale and creating uncertainty.  The best thing you can do is discretely assemble the information in the lead up to launching a sale process.  We can help.  With having completed over 200 acquisitions, we know what buyers will look to review, we know what matters, and we know how to explain any gaps in information.

The reason the due diligence process can be excruciating is an evolution in the way private equity funds approach acquisitions.  Over time, their investors have come to demand fulsome due diligence reports from lawyers, auditors and other advisors as part of the “underwriting” process of the investment in a company.  No longer do acquirors simply rely on the representations made by sellers as to the company’s state of affairs.  Third parties are hired to validate those promises.

This does not mean that we can’t be efficient if we are creative.

Traditional M&A advisors wait until bids have been received, a leading bidder identified, and the lawyers of that bidder have sent over a due diligence request list, before putting a database of information together.  This approach creates delay and as documents and data is being  -gathered at a whirlwind pace – increasing the risk that your employees discover that you’re considering a sale of the company.  We’re not traditional M&A advisors.

As we help you improve your business in advance of a sale, we’ll create a database and assemble information that we can discretely provide to buyers once we launch the sale process.  Gathering that information in advance will also enable us to address any contingencies (bad contracts, for example) that might otherwise frustrate your objectives in a sale.  Any supplemental requests (after we’ve identified one or more attractive buyers) will be discrete and, hopefully, unnoticeable.

On a related matter, we can offer a service almost unknown in the U.S. (but common in Europe).  In European transactions, sellers often provide a due diligence assessment of themselves in order to reduce delay in the transaction process.  These approaches are almost never done in the U.S. but if maximizing speed, discretion and certainty are key concerns, we have an alternative to traditional U.S. practice.