Due Diligence – Part 1 – What is due diligence for?

Due diligence is at the heart of business sales and acquisitions and often involves 3 separate processes, Financial, Legal and Commercial. Put simply it’s the means by which buyers and their advisers get to investigate a potential acquisition to ensure that the business is what was represented by the seller.

It has no benefit to the seller – the price is never going up!

From a seller’s perspective the best outcome is no change on the offer price and the agreed deal terms.

Here are 3 tips to help you avoid price-chipping during Due Diligence:

  1. 1.   One way to reduce the chances of this happening is to ensure proper disclosure BEFORE an indicative offer is made; skeletons in cupboards always appear during Due Diligence! If there is clarity on what is for sale it makes it much harder for the Buyer to “chip” away the offer price.
    2.   Having more than one potential buyer, to provide competition in the sale process, means that the buyer is far less likely to reduce their offer if they are aware that there are alternative buyers waiting for the deal to stall and come back into the process again.
    3.   Agree Heads of Terms with the buyer ahead of formal Due Diligence. Whilst this won’t be fully legally binding, it will set out the terms that have been agreed between the parties. This helps to focus the minds of both parties and can highlight any major areas that are not agreed at an early stage which will reduce time and costs in the long run.


To find out more about preparing for a business sale, join our panel of experts at an Evolution CBS Masterclass.


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