Due diligence is a crucial process for evaluating a company that is for sale. It covers everything from financial and legal to operational and environmental. There are two primary types of transactions that require due diligence: selling a company, and merging with or acquiring another company. Each kind of transaction is likely to be complicated, which could add time and length of the process.
Due diligence may reveal many possible risks that could sabotage a deal. It is crucial to set up and prioritize your priorities. You must also consider what the results of the due diligence process will impact your deal and the terms you will offer. Do they depend heavily on one or two clients? Do you anticipate customer churn in the near future? Think about these questions to help you set expectations in advance with the vendor.
Individual buyers are less thorough in their due diligence than corporations. This is partly due to their personality (e.g. they may be risk-averse and detail-oriented) and also due to the fact that they depend on professional advisors who charge their own hourly rates. However it is important to prepare for the due diligence process as early as you can increases your chances of the sale being quick and successful.
Designate a point person to streamline communication and reduce the number of people who are reviewing information. This will allow you to avoid delays and ensure that all issues are promptly addressed. It will also be easier to convince the buyer that the due diligence time can be reduced by having everything prepared and organized to begin.