Sell-side due diligence: The means to an end

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Provided by Plante Moran

Written by Michele E. McHale, Robert Shefferly III, Eric Wozniak

 
While due diligence is an inevitable step in the buying process, it’s not as prevalent with sellers. But it should be. After all, it increases the odds of an efficient and successful sale. Read more at Middle Market Growth.
 

As M&A deals become more competitive, buyers are taking steps to close transactions as efficiently as possible. That’s why private equity firms conduct sell-side due diligence, a process that can increase the odds of a smooth, successful sale.

Sellers find that this type of pre-qualification has many benefits. Uncovering potential risk areas before going to market prepares the management team for the buyer’s due diligence process. If done far enough in advance of a transaction, sellers can fix problems or position an issue appropriately for a potential buyer. What’s more, an independent, third-party presentation of the seller’s financial and tax results accelerates the buyer’s due diligence because the seller already has a report with the data the buyer is going to ask for.

There are two major areas where sell-side due diligence can uncover details that directly impact selling price: quality of earnings and taxes.

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