Ask the Advisors – Engaging a Third-Party to Conduct Sell-Side Due Diligence

Joe Basilico, CPA – Senior Manager, Transaction Advisory Services

Q.  I’m looking to sell my business. Should I engage a third-party advisor to conduct financial due diligence on my company prior to going to market?

Yes, working with third-party advisors experienced in due diligence can be very valuable in completing a well-executed sales process. Today, more and more sellers are investing in sell-side financial due diligence as a result of the clear benefits.

Going through the due diligence process, your advisors will help you better understand your company’s financial situation and prepare you for the buyer’s due diligence process. Before going to market, the work performed may uncover any potential risks in your business which will allow time to appropriately remediate the issue or to provide advanced explanations to help ease buyers’ concerns. In some instances, due diligence may bring to light major issues influencing your decision to sell in the near future. You may discover your business is not currently positioned to meet your exit objectives and a focus needs to be placed on building up value before going to market.

Typically, buyers tend to have more confidence in the financial data when it has been compiled and reviewed by an independent, experienced third party. This is especially true if the company being sold is a carve-out of a larger organization; has complex accounting and financial reporting; significant adjustments to earnings; or has had changes in accounting methods or systems in recent periods. Having reliable data prepared in advance will reduce the buyer’s questions and time, and thus, save you time. You can lean on your advisors to do the heavy lifting of gathering data and use them to assist in fielding questions so you can focus on getting the deal done. Having a sell-side due diligence report to provide to buyers will accelerate the process and increase the likelihood of a successful sale.

Have a Question?

For more information on sell-side due diligence, contact our transaction advisors today.