Acquisitions & Due Diligence for Buyers

In mergers and acquisitions, purchasing a business without doing due diligence substantially increases the risk to the purchaser.

There are several reasons why due diligence is conducted:

 - To confirm and verify information that was brought up during the deal or investment process

 - To identify potential defects in the deal or investment opportunity and thus avoid a bad business transaction

 - To obtain information that would be useful in valuing the deal

 - To make sure that the deal or investment opportunity complies with the investment or deal criteria

The costs of undergoing a due diligence process depend on the scope and duration of the effort, which depends heavily on the complexity of the target company. Costs associated with due diligence are an easily justifiable expense compared to the risks associated with failing to conduct due diligence. Parties involved in the deal determine who bears the expense and usually, both sides come to the table with their own consultants and research.

We utilize a structured approach to work with Buyers during the Management Presentation and Due Diligence phases to confirm the Seller’s representations, and identify any hidden risks.  As a starting point, we work to validate financials and reduce or eliminate the potential for post-close surprises in the following areas:

Customer or program issues

Inventory issues

Regulatory issues

Sales Forecast Accuracy

Key Employee Departures

Having been in the CEO role through the full sale process, we have a sense for where key issues may be hidden, and work with the Buyer to surface them prior to close.  Every business has issues. You need to know what those issues are, and whether or not they matter.