I met with a client a few weeks ago to tape a testimonial video. During the course of our discussion of the successful sale of his company, one of the topics we covered was the due diligence process. He put it simply when he said, “I had no idea how complex, detailed, and time consuming due diligence would be even though my deal maker warned me in advance what to expect. I am so glad that I had Generational Equity working with me to prepare me for due diligence.”
The key part of his statement relates to preparation. Most clients that I meet with post-sale tell me that due diligence was probably the most challenging part of the entire sales process. For those of you unfamiliar with the term, M&A due diligence is the process whereby a seller lifts the veil and the buyer is allowed to peer into the vital inner workings of your business. If you are not prepared for this, chances are good that the buyer will find something that you have not disclosed – good or bad – that may slow the deal down if not kill it.
The critical first step in the Generational Equity M&A process is a thorough and complete evaluation of your business. This allows us to start asking you questions about your company that will begin to prepare you for due diligence. Obviously the evaluation of every privately held company is unique to that company, your industry, and your specific set of circumstances. However, in general during our evaluation we will examine:
Again, this list is not exhaustive and does not include all of the areas we examine with our clients. Your specific situation may require us to delve into other factors and areas as well.
After the evaluation is completed and our client agrees with value and timing, we then take them to market and begin the process of looking for a buyer. But before we start this next process, our deal team does a second “due diligence” vetting and spends time working with the client to create an offering memorandum (OM).
The OM is largely based on the findings in the evaluation, but the deal maker will delve into even greater detail into any information that might lead him/her to believe that a “deal breaker” may be present. Again, this could be anything that is specific to our client’s company. Once the OM is completed and the deal maker is secure in his knowledge of the business and the company’s intangible assets (“off balance sheet” assets that specific buyers may find attractive), buyers are approached.
So you can see the first two phases in our process are designed to do two things:
A typical due diligence checklist that a buyer would present to a seller contains 200-300 questions. Some are very standard and easily answered and may have already been covered in the OM or evaluation. Others can be very detailed and require significant homework on the part of the seller. Common discussions may include:
Again, this is just a sample of the types of questions on a due diligence checklist. If you have done your homework, due diligence can be navigated successfully. Certainly using a reputable experienced M&A advisory firm like Generational Equity will help your chances of closing immensely. But even our deals often face hurdles because buyers can be very cautious, especially post-recession, to close a deal. In fact, due diligence is now taking 30-40% longer than it did just a few years ago. Buyers are out there and active, but they are just being extra careful to make sure that the targets they are buying will generate the ROI they need.
If you would like to learn more about due diligence or the entire process of successfully selling your company, I invite you to attend a Generational Equity M&A seminar. We hold these throughout North America and they are specifically designed to help you learn how and when to exit your business for the most profit.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2013 Generational Equity, LLC All Rights Reserved
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice.
By submitting my name electronically and clicking the “submit” button, I understand that I am providing Generational Group, Inc., Generational Equity, LLC, Generational Capital Markets, LLC, DealForce LLC, their affiliates, representatives, contractors, etc. (“Generational Group”) my telephone number, which may include a number that is wireless and/or a number that is on a national, state, or other Do Not Call registry or list. I hereby consent and agree to receive telephone calls including any autodialed and/or pre-recorded telemarketing calls and/or text messages (telemarketing) from or on behalf of Generational Group at the telephone number provided. I further consent and agree that telephone calls may be made using automated technology such as an automatic telephone dialing system, artificial or prerecorded voice, or SMS text messaging. Consent is not a condition of purchase. I further warrant and represent that any telephone number provided is not on any state or national Do Not Call Registry and that by agreeing to these terms and conditions that if any number provided is on any such registry, I hereby consent and agree to receive telemarking calls and/or communications including any phone calls, text messages, URLs, links, emails, etc. to the telephone number(s) and/or any e-mail addresses provided. I understand that by entering my name in the electronic form provided, that I am signing my name as equally as if it was my handwritten signature and that it is my intent to provide an “electronic signature” as that term is defined in state and federal law, as well as industry practices for e-commerce.
For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Group may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, Trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Group BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Group.
Success, you have been added to our list.
it all started with a conference.
start your story today,
speak directly with one of our senior advisors +1-972-232-1121