Anybody looking at buying or selling a business needs to ensure that the financial information they hold is as accurate as possible. This is to ensure that an appropriate purchase price is paid, and also to eliminate any financial surprises appearing after the transaction has been completed.
Transparent financial data will assist in a quicker and smoother sales process. Buyers need to understand the true financial returns from a potential acquisition.
Sellers help the process by providing the best information possible. An independent assessment also provides potential buyers with certainty about the business and the nature of its cashflow.
Financial due diligence can help to identify and focus attention on the factors in the business that will be critical to its future success.
Some indicators if you need Due Diligence:
- Organic growth of your existing operations is too slow or has hit a ceiling
- You wish to increase your market share quickly
- Additional products or services can be sold to your existing customer base
- Your long term strategy involves acquisitions or disposals
- Your company is in the process of restructuring / re-focusing its activities
- You want to reposition your portfolio focus on core businesses, or return value to shareholders
Benefits of Due Diligence:
- Increased information flow reducing uncertainty helps transactions close more smoothly
- Key issues are identified and can be resolved
- Information on cash-flow can help with pricing decisions and greater certainty over the future of the business
- Vendors can more easily control the sales process, and maximise their sale proceeds
- For sellers, early identification can have matters resolved prior to a sales process commencing
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