DISCOVER HOW TO AVOID DUE DILIGENCE PROBLEMS SO YOU CAN CLOSE THE DEAL

 

You are excited….you have agreed a deal with the purchaser….you have even started to imagine life after your business has been sold…travelling, golfing, no longer checking your phone 24/7…..living life stress free….but HOLD ON.

There are still many hurdles to overcome….

One of the more significant hurdles is to successfully navigate the process of ‘due diligence’.

Failure to get through this process will mean either a reduction in price or, even worse, no deal.

Your opportunity to maximize your exit and achieve the big payout you deserve can easily disappear.

I have been involved in many deals over the last 20 years….as a buyer and a seller.

Some have gone through easily with only relatively minor hitches along the way. Others have fallen apart…leaving all parties upset and frustrated.

Just because you have agreed the price and other key terms doesn’t necessarily mean the deal will complete.

An important part of the sales process is ‘due diligence’.

This is the detailed investigation and audit undertaken by the purchaser prior to exchange of contracts.

There are 3 elements of due diligence:

  1. Legal
  2. Financial
  3. Commercial / Operations

Legal

The following points will be checked by the lawyers – ownership structure, statutory and regulatory compliance, contractual relationships, intellectual property [IP}, employees, property and insurance.

This list is far from exhaustive but gives you a flavour.

Financial

The accountants will review the financial statements of the business – profit / /loss accounts, balance sheets and tax returns [if the company is being purchased].

Likewise, this list is far from exhaustive but provides an indication what will be analysed.

Commercial / Operations

The purchaser will want to see full details of the following – strategic plan, marketing, management, customers, technology, operations and culture.

Similarly, this list is indicative and gives you an idea of what you will need to provide to satisfy your purchaser.

 

There’s so much information to collate and provide….it can be a minefield!

 

So how can you successfully navigate the process and avoid the problems?

There are 2 important points to consider:

1.    Be Careful What You Say

All the way through the sales process from making your initial claims to your team of advisers, sending out your Sales Memorandum, to your first meeting with all potential purchasers etc…be extremely careful what you say in relation to your business.

Do not make any bold statements or claims unless they can be clearly verified in writing.

Everything must be documented….the purchaser wants proof!

2.    Preparation, Preparation and Preparation

What is the biggest mistake a business owner makes when selling their business?

Lack of preparation!

Few business owners choose the timing of when they sell due to external events such as divorce or even death.

If you aren’t prepared, the value of your business is significantly reduced.

Therefore, get organized and the additional benefits of a more efficient and profitable will also flow.

 

Consider these 2 statements:

  1. Most business owners spend more time planning their holiday than they do planning their business exit.
  2. Very few business owners understand what it takes to maximize the value of their business on sale – even fewer take the trouble to prepare.

 

If you want to discover the ‘secrets’ of how you can maximize your exit and achieve the big payout you deserve go to http://www.maximizeyourexit.com/sell-smart-net-what-youre-worth

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