Too many sellers go to market without doing the proper clean up ahead of time. Clean up means: having clean accounting records, critical customer and supply contracts in place, legal ownership documented, and operating issues resolved. Too many sellers find themselves stranded, trying to bail out a deal that could have gone smoothly but for some careless mistakes that were overlooked. Don’t let this happen to you.
It’s no secret that the due diligence stage takes time. Even if you’re not ready to launch a formal sale process, there are steps you can take now that will pay dividends when you do go to market. Locating and organizing important documents is the first step. It is also important to review and analyze your operating data to identify issues that may need to be cleaned up. We can help you standardize your reporting structure and set up systems to identify potential issues. Consider us the quarterback of your team, preparing you to score that touchdown when the time is right.
Documents Reviewed
Due diligence lists are exhaustive and ownership’s time is limited. We can help you organize that list into tiers to identify priorities for collection and review.
A note on financials: buyers will expect three years of accrual-based, detailed historical financial statements by month and three years of projections. They expect your forecast assumptions to be clear and data driven. If this is an area where you need support, we do it every day – give us a call.
Documents Analyzed
Analyzing the information you have collected is critical and is often skipped when taking a company to market. Is your information clear and correct? Is there anything that could be cause for concern to a prospective buyer?
You may have a non-standard inventory tracking and management system, customer contracts that don’t quite match invoices or are not accurately reflected in the accounting system, or the work product of an employee who is in the wrong seat and hasn’t delivered as expected. Take note of any potential issues.
Information Organized
Corporate development offices at large companies review hundreds of deals each month. It’s important that buyers be able to easily review your data and quickly identify the opportunity your company presents. Part of accomplishing this is making sure your information is well organized.
There is a lot of information you won’t want to share in the first round – customer names, proprietary information, and detailed employee data – so you will need to make sure this information is properly redacted. You’ll also want to make sure all of your documents are print formatted, marked confidential and watermarked. While it sounds simple, it can be time consuming and should not be skipped.
Due diligence is a critical piece of the M&A process, and when you need support, C Squared Solutions is here to help.
