Enduring the Due Diligence Phase
Selling a business and going through the due diligence phase is somewhat like going through a courtship when you are considering marriage. You have already established the fact that you like the idea of taking on the commitment, now you are just trying to learn as much as you can about the opportunity just to make sure you didn’t miss anything big that could be a game changer. It can sometimes be as emotionally challenging as a courtship as well because you know that at any time the buyers may see something that rubs the them the wrong way and they will drop the deal and walk away.
Being Detailed In Your Responses
During the due diligence phase the buyer is trying to figure out all of the little details that will be an issue after or during the sell. It is important for the seller to recognize that these details are going to come out sooner or later, and the buyer is not going to make the acquisition until they do.
We have all heard the phrase, “The devil is in the details”. This is particularly true in the M&A world. When you look at the company up front it appears to have qualities that attract a buyer, but there are always questions and a buyer will not make the acquisition until those questions are answered. In fact, the buyer owes a fiduciary responsibility to the investors to ensure questions are answered and the risk is assessed. Even if the buyer is able to avoid all of the legal issues, if the company falls apart and the invested dollars are lost then that buyer will lose his investors’ trust for future deal.
The point is that the questions will be answered the long way or the short way, and if they are not answered the buyer may just walk away from the deal. So be detailed and responsive in the requests for information.
Being Responsive To Due Diligence Questions
Often times the business owner will not have all of the answers to the buyer’s questions, in such cases the seller will have to turn to his third party consultants to have the questions answered.
Many businesses that enter the M&A market looking for an exit strategy have their own third party accountants, lawyers, and/or consultants. When these parties are addressed during the due diligence phase they learn that their client is up for sale and they realize that they may lose that client. In such situations many third party consultants begin to do what they can to break the deal up. They are trying to keep their client and they think that if the deal doesn’t go through then they will not lose that client. If these parties would just realize that if they are extremely responsive and helpful during the process they would be viewed as essential to the business rather than obtrusive. Give the soon to be new owners a reason to keep you around rather than a reason to let you go the second the deal closes.
- Covid-19 Impact on US Private Capital Raising Activity in 2020 - May 27, 2021
- Healthcare 2021: Trends, M&A & Valuations - May 19, 2021
- 2021 Outlook on Media & Telecom M&A Transactions - May 12, 2021
