Seller's Due diligence, is it recommended?
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Is it recommended that the seller performs its own due dilligence before opening its M&A process to the market?
I believe that is of huge help if a Company is not afraid to be transparent with the buyer.
It can be easily done on Excel or Word for a number of functions and by country.This facilitates the work of (1) M&A office and (2) the one of the Divestiture/Spin-Off teams later on.
In groups or companies with M&A dedicated)offices, the preparation of preliminary DD material by country may be even required to Functions/Business so that the buyer is given it to understand what is purchasing.Yes, the seller should do its own due diligence to prepare itself for due diligence performed by prospective buyers.
Yes – this may also be needed for a buyer from perspective of reputation / possible litigation check in case any issues with the seller
I believe it would be helpful in shortening the buyer’s DD process, providing level-setting information to all bidders, and be transparent on certain unique characteristics of the seller’s business that may not be discovered if the buyer’s DD service provider is not experienced. The vendor may leverage the latter insider’s information to ask for better pricing.
I would highly recommend conducting one’s own assessment as this will help the seller to ask for the right value of the business and to set the right expectations.
It seems recommended. However, I think that in practice only big corporate (and not those SME) will be incentivised to conduct such DD given that there are costs (both time and money) invovled.
Yes. It is recommended so that the seller can assess the proper value of its business and assets and accordingly negotiate with the buyer, thus setting right expectations.
Hi Bernardo,
Thanks for the prompt…clearly there is a lot of interest.
I tend to agree with many of the points above in the fact that a seller should complete its own assessment of any businesses it plans to sell prior to engaging third-party partners. The quality of the assessment will obviously depend on the size of the seller (resources available and timeline), but especially for larger transactions (spin-offs, divestitures, carve-outs), an internal evaluation will help to streamline the future selling process, as well as potentially strengthen the sellers negotiating position.
All the best.
Craig
Yes pls. I too believe it is highly recommended to do seller’s due diligence to have an idea on where they stand in terms of strategy and M&A idea and M&A business case prior to M&A process preparation.
Without doing DD on these two components, doubt the target company can attract prospective buyers and high possibility of deal failure.
To begin with strategy and M&A idea, this is where seller would initiate an idea on why and what to sell like whole business/carve-out by analyzing its corporate strategy (portfolio/transformation/divestment strategy) Vs business strategy (increase financial returns/increase strategic focus/reduce operational complexities)Next stage lead to M&A business case due diligence – To find out sell-side strategy and its scope, target investors (strategic Vs financial), legal term sheet outline (SPA, APA,FPA,TSA)
I agree with the module content. Seller should complete its own assessment of any businesses it plans to sell prior to engaging third-party partners.
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