When you find a buyer for your business, they will move to a ‘due diligence’ phase. This is the part of the transaction process that will set the tone of any negotiations, and ultimately how much your business will sell for – so it is very important that as the seller, you are fully prepared. Here is our guide to help you out.
What is due diligence?
Due diligence is essentially an investigation – your buyer will look to get as much information about your business as possible so that they know in detail what they are buying. The scope of the investigation will be up to the buyer, and can differ on a case-by-case basis, but will typically encompass information regarding finances, legalities, employees, customers, and suppliers. During the due diligence, the seller will be asked to provide honest responses to any questions, as well as supporting documentation.
Why should you prepare?
When a buyer expresses their interest in your company and the transaction moves to the due diligence phase, the clock starts ticking. Any changes to your business in this timeframe can have a negative impact on the valuation – and could even cause the deal to fall through altogether – so it is in your best interest as the seller to fast-track the process. Effective preparation will make sure you have the relevant documents available as and when they are needed, with no delays.
You can prepare for this phase of selling your business by following our four-step checklist:
Finances – make sure that all your financial information is up-to-date, accurate, and available. This includes any debts, liabilities, profits, and losses. Make sure that copies of tax filings are ready for your buyer to view, as well as your ownership documents.
Contracts – all of your contracts need to be in order and accessible. Your buyer will want to know about everything – the lease on your business property, warranties for any equipment, employee contracts, every single contract that is currently active will need to be looked at.
Company Structure – you will need to have clear, detailed information available on the structure of your company, including key responsibilities and duties. It is also important to assign your own operational tasks to someone who will be staying with the company, where possible.
Plans – your buyer will also want to know about the market: so any information you have about your competition, your growth plans, and expected opportunities that you have identified will be desirable.
Use an M&A expert
The single best thing that you can do to prepare for due diligence as a seller is to engage an expert. At Pinnacle Pharmacy Group, we only work on mergers and acquisitions in the pharmacy and digital health sub-sectors – meaning that we have the experience, knowledge, and skills to handle anything that the sale process can throw at you.