What is Needed to be Due Diligence Ready?
For a company looking at a merger or an acquisition, the process of due diligence is an unavoidable one. Thorough due diligence needs to be conducted as it helps to establish the true value of a transaction. Due diligence services in India are comprehensive and as a business owner you should be looking forward to due diligence. Here are some of the things you can do to be due diligence ready.
- It is never too soon to prepare: An acquirer will want to check out an extensive amount of documentation and they can be anything from contracts with suppliers, computer systems, data protection, intellectual property registration, employee contracts and much more. It is a good idea to draw up a checklist and ensure that all records are available and up to date. If you have the information handy, it helps to expedite the transaction and also makes the company look more attractive to potential buyers.
- Make use of a data room: Data rooms are quite frequently used in mergers and acquisitions. They provide an online and secure platform which will allow you, the seller to update all the documents that are required by the acquirer. The data room will also allow the seller to monitor the access to different documents that are uploaded there. Additionally the data room will give you useful information on the acquirer’s activity. Providing insight into the acquirer’s area of focus, it will help you to be better ready during negotiations.
- Due diligence is not the same for everyone: Depending on the potential that the acquirer brings to the negotiation table, each will have different due diligence needs. If the acquirer works in the same sector as the seller, he would be knowledgeable of the contract terms with certain suppliers, and thus he will not put too much emphasis on that area. However an investor with limited knowledge of the sector will want to know more about operations.
- Focus on key issues and resolve them: Potential issues if not dealt with before the due diligence stage, the acquirer will tend to chip away at the price that is being offered or even walk away from the deal. The acquirer is primarily looking to see if the company is financially stable and thus the seller will need to show that the sales, profit and cash are growing in a healthy manner. Another key issue that has to be resolved is the liabilities like threats of litigation.
Lastly, you can try employing corporate advisers who can help prepare you for a sale and direct you in the right direction. This also includes due diligence and the corporate adviser’s experience with the process means that they can assist you in getting ready for due diligence.