Due Diligence: the seller's sight

Due diligence is a study and analysis of the viability of your business by the buyer, that is, its full verification.

Due diligence usually requires an integrated approach, and it also helps to establish trust in connection with the conclusion and conduct of a major transaction between counterparties. This procedure — it is a valuable risk management tool.

However, for a seller, the due diligence process can sometimes be quite complex. You not only sell your business, but also manage it. But there are ways to make the process less burdensome and ensure your business is attractive and safe.

In the driver's seat

As a seller, you have access to information that is important to running your business. You also know what works and what doesn't — you are the driver. In fact, everything may be fine, but when the buyer requests information, it can seem intrusive and intrusive. You must remember that the buyer does not have the business knowledge that you have, and he wants to use the due diligence process to make his buying decision more balanced and comfortable. 

This is their test drive.

Are your documents in order?

To avoid being bombarded with multiple requests, get your paperwork in order from the start. Even the most interested buyer can be easily put off if they discover something unexpected. Purpose — get your business in order so that it looks great both on the outside and on paper. A simple "clean-up" done at the right time is essential to ironing out any shortcomings in your operations and to prepare for customer questions. When  due diligence starts, you won't want to spend time looking for documents. Requests may come directly from the buyer or its legal and financial advisors.

Start "cleaning" by examining their contracts. Make sure they are all up to date and have all required signatures. Any disputes — legal or other — involving suppliers or employees, for example, must be settled before the sale process begins, so that the dust has time to settle before the buyer starts looking for problems.

Next, look at your company's assets. Don't forget intellectual property, it is of great value and should be carefully documented. This will ensure that there are no problems that will scare away a potential buyer, and you can also increase the value of your business in order to get a better price. Physical equipment and assets must be in good working order. Now is the time to deal with those little things that can devalue your office space, cars, vehicles, etc.

Basically, as a salesperson, you want your company to look and feel like an opportunity with a prosperous future. You want to avoid unpleasant surprises for the buyer and at the same time ensure the true value of your business so that you can get a price at which it is worth selling.

The last thing you want — this is a revision of the terms of the sale or a complete breakdown of the transaction.

What about confidential information?

You may find that buyer questions require confidential information. Of course, you do not want this information to fall into the wrong hands, but you also want to maintain transparency with the buyer. The solution is to ask the buyer to sign a non-disclosure agreement (NDA). Also known as a confidentiality agreement, an NDA doesn't have to be overly complicated. The key elements required include the parties involved, the definition of sensitive information, and the scope for using that information.

Hire a professional

Your company will continue to operate until a potential buyer is found. To make sure all your paperwork is in order, you can do your own due diligence or hire a professional.

It is extremely important to turn to experts, especially if you have to prepare documents. This process is labor intensive and complex. A professional with experience in this field will become a competent and reliable assistant in preparing your business for sale.

You can also enlist the help of a professional team of consultants to draft a sales prospectus, explore deal structure options, and screen potential buyers. And if the buyer has made an offer and due diligence is underway, they can help draft an NDA and respond to requests for information. One of such professional teams operating in the international market, — this is Russian-Eurasian Business Broker (REAB).

Your employees

Sale of business — challenging times not only for you as a salesperson, but also for your employees. Even before the company enters the market, rumors about a possible sale may reach employees. There may also be talk of job security and who will be the new leadership. In order not to disrupt the flow of trading operations, it may not be worth making any official statements. However, the feeling of a company is more positive when employees know what's going on, as a company's transparency is an attractive feature for any buyer.

Once a buyer has been found and the due diligence process has begun, managing the business and responding to buyer inquiries can be much easier if your employees really know what's going on. In fact, your staff may have a lot of the information you need, and it's best to involve them in the process. Identify key people who can assist with due diligence and ensure they are available when the time is right.

If selling is on the agenda, it's really worth putting on the buyer's hat and looking at your business critically to identify and quickly eliminate anything that might turn it off. Think of your business from a buyer's point of view and see if you can confidently answer the following question: Is this company a good buy?