The price has been negotiated the terms are agreed to and now we enter the due diligence phase. In this phase the acquirer will go through every single aspect of the business to ensure what was previously provided is backed up with facts.
We at GillAgency typically provide 30 days of due diligence because if we don’t put a deadline on it, the due diligence can drag on for a very long time. A lot of times the business owners feel that the business is almost sold when they reach this phase, not true.
Here Are Some Of The Items That You Should Not Be Doing During The Due Diligence.
Don’t increase wages or bonuses of your employees. This will lower the projected net income and lower the negotiated price.
Don’t take a step back from increasing or following up with sales. This is will lower the projected revenue and will affect the price of the business. In some cases this will also have another affect; reduction of work in the future making the business less appealing to the acquirer.
Don’t let your accountant take charge of this process without you checking on the progress. You need to be heavily involved and know what is being asked and sent across in a timely fashion.
Don’t over deliver, only provide what is requested. This over delivery will boggle down the acquirer and slow down the process.
Don’t take too long to respond with the answers or documents. This can be off-putting and may show the acquirer a lack of motivation to sell the business.
These are just few of the items that illustrates what not to do during due diligence process. One or combination of these items can lead to a failed sale and waste of everyone’s time. Of course, an expert M&A advisor can help you navigate all of this with ease. Selling a business is actually an art, therefore you should hire a professional who has done this multiple times to guide you through this process.
