Making diligence confirmatory not revelatory – No surprises!
Get your housekeeping up to date – you will need to share a lot of information as part of the diligence process. Whilst it is not the most exciting area – it is worth remembering that not preparing thoroughly for this in advance could cost you millions.
If you prepare board packs – review them for sensitive areas. Are you preparing consistent and regular management accounts? Relevant KPIs, and accounting policies correct? We are seeing some really interesting analytics tools that can save huge amounts of time and more importantly can present your business in the right light to any potential buyer.
Review your business in detail for any key issues – corporate structure, financial, tax, commercial contracts, IP, product, technology, employment, litigation, insurance, property and pensions.
Every business has issues – the skill is how and when you engage with the buyer on these issues that make a massive difference. The buyer is looking to minimise risk as part of the diligence process – making sure the buyer feels positive is key. Supply information timely, present the issues and show how they are being managed, and share good news about the business – they will then see the business is well controlled and their risk is minimised.
The flip side is if diligence uncovers issues you were unaware of – then the buyer will get concerned, likely doing further diligence, which could unsettle them further. This can lead to a restructuring of the deal or even the buyer walking away.
To sum up, preparation is key. It is never too early to start planning and preparing, take your time, be thorough and deliver a consistent message from start to finish – then you can achieve a fantastic outcome.