In the world of Corporate M&A, well planned sale processes have typically done an internal due diligence review before hitting the market. For instance, management presentations should be vetted, data rooms populated, and accounting and legal advisors fully engaged. While every deal presents some surprises during the diligence process, sophisticated sellers should have gone the extra mile to help minimize them.
Most due diligence can be broken up into two sections: Compliance and Value Drivers
Compliance issues are typically the most difficult to overcome. For instance, issues related to environmental, legal or regulatory concerns. Any finding as part of the compliance review will typically cause a material delay in the process and increase deal costs for both buyer and seller. For buy-side diligence, try completing the compliance review early on to minimize total deal costs should an issue arise. And for well-prepared sellers, compliance issues should have been addressed well before going to market.
Hopefully, most buyers of these businesses can focus their diligence efforts on key value drivers. Where does the buyer add synergies across every aspect of the business? And many times, how can the best practices of the seller be integrated into the buyer’s business?
Overall, to complete a successful diligence, each Process Owner (e.g., Finance, HR, Operations, etc.) of the diligence should be encouraged to:
- Show full completion of their section of the diligence checklist
- For identified concerns – detail the remedy and quantify the relevant cost to fix
- Suggest synergies and quantify the savings and timing to achieve
Diligence is a complex and detailed process. Fundamentally though, diligence breaks down to issues either related to Compliance or Value Drivers that each Process Owner should have responsibility for identifying and ultimately resolving too.
Sun Acquisitions is a Chicago based M&A firm specializing in helping businesses confidentially buy and sell privately held firms. Our team is comprised of certified business intermediaries with deep transactional knowledge and experience across a broad range of industries. Our Advisors have experience working on hundreds of due diligences for small and middle market transactions.
Let our team of Advisors and former Corporate Development Professionals help drive your business to the next level. Contact Sun Acquisitions for a free consultation at [email protected].