Due Diligence Can Make or Break Your M&A Deal

When you’re selling a business, high-quality due diligence is essential to keeping both sides happy. Buyers want to ensure that your business really is what was agreed upon, and if provided poorly conducted due diligence, could back out of the deal. Sellers should ensure that they’re following these guidelines to prevent a deal from falling through.

Conduct an Audit

Buyers are primarily interested in confirming the finances of the business. Working with an accountant well ahead of time will not only ensure that you’ve created a comprehensive review of the business financials but also make the period of due diligence move on much faster. The income statements, balance sheets, cash flow, and other critical financial areas of the business should all be included in the audit to provide a buyer with an accurate view of its financial health. 

Cover the Business Relationships

Just as important to the health of a business are its relationships. A buyer will want to know pertinent information about customers and employees in order to keep those relationships strong after an acquisition. Include information about how your customers are retained, and whether or not they’re on a renewable contract that a new owner will be able to sustain. Buyers also need to review employee contracts, benefits, and payroll information. 

Depending on the type of business, contracts could make or break your M&A. If crucial business contracts are non-assignable, a buyer may feel that the business will not be able to operate similarly to how it did before the acquisition. Outstanding loans, leases, or lines of credit could dissuade a buyer from following through, or lead to a renegotiation of the offer. 

Review the Business Property

Give an accurate evaluation of all significant property, including both physical items and the intellectual property rights currently held by the business. Real estate, company vehicles, inventory, and equipment are all crucial to the operation of your business, and their value shouldn’t be overlooked. The intellectual property of your business may also be some of its most valuable assets, as well as any important trade secrets or custom processes.

Work With an Experienced Business Transaction Attorney

Conducting good due diligence will go a long way in securing your M&A deal, and so a qualified business transaction attorney should be consulted to ensure you’ve covered all the necessary areas of your business. Our team at Baker Jenner LLP is ready to work with your business to make your next deal a success. Contact us today to get started.

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Baker Jenner LLLP

Baker Jenner LLLP is a business solutions law firm. We partner with clients to achieve their goals while managing transactional, regulatory, and legal risks.

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