Streamline your sales due diligence for enterprises with airSlate SignNow

How to create outlook signature

virtually every business sale and acquisition transaction involves a due diligence process many business owners don't know what it is and what to expect let alone how to prepare for it in this video we'll outline what due diligence is who it is for when it is performed and how owners should approach it and prepare for [Music] it the typical due diligence process is performed by or on behalf of the buyer of a business this is called buyer due diligence where the buyer of a business exercises their due diligence by engaging in a detailed review of all aspects of the business they want to buy there is also vendor due diligence where a business owner will commission someone or a team to perform due diligence on their own business before going to Market to help them prepare for the process ahead the vendor due diligence report may even be made available to intending buyers however in most situations only buyer due diligence is performed by the intending buyer after the parties have already agreed the proposed terms of the transaction so what is due diligence essentially it is an audit of the business it is usually done before or after execution of the business or share sale agreement depending on the complexity of the business and the transaction it is in both party's interest that due diligence be carried out although due diligence is primarily done by the buyer representatives for the buyer's benefit it is also in the sellers interest that the buyer performs due diligence sellers are usually expected to provide warranties if the buyer has completed due diligence or has had the opportunity to this may mitigate any claim of misrepresentation and may also preclude the need for some seller warranties as the information can be verified firsthand whereas many business owners feel threatened by the thought of being audited provided they have nothing to hide the due diligence process can be seen as an opportunity to showcase the quality and strength of their business with this in mind business owners should welcome due diligence as an important step forward in the sale process what is involved in the typical due diligence process well there are three broad aspects to due diligence Commercial Legal and financial it includes assessment of the financial performance and Commercial viability of the business the legal due diligence is normally performed to confirm that the owner has titled to the assets it's selling and also that there are no unexpected uh legal actions for example being uh undertaken that the new owner May inherit it involves checking and verifying all the information that is provided up until that point and is usually asking a lot more detail than has been required initially the aim is for the buyer to have no surprises or only Pleasant ones after they've taken over the business both buyer and seller need to have experienced and well Well Suited teams of m&a accounting tax and legal advisors to have a successful due diligence process before due diligence can start the buyer needs to decide who will be on their due diligence team to appoint them and to arrange for their time to be made available considering each party pays their own costs and due diligence usually costs both parties normally the buyer's cost would be greater it could amount to hundreds of thousands of dollars even on midsize business transactions and of course much larger for major corporations or it could be over in half a day normally due diligence starts with a DD checklist being prepared and sent to the sellers representative EG their m&a advisor the m&a advisor should provide their business owner clients with a sample due diligence checklist to help them understand what may be asked for coming up to the due diligence process once the due diligence questionnaire is received there is normally a process of gathering all the information and responses the data is normally up uploaded to a virtual data room which can be made accessible to the buyer Representatives when ready of course the sellers Representatives should be able to access it to and quite often a list of all the data that's been uploaded to the data room and made available is included in the sale contract as an as a another schedule the virtual data room allows buyers to access sensitive client information in a controlled environment data is secure and access via individual login credentials all activity and downloads where permitted are recorded updates can also be made during the process in response to further questions as they arise m&a advisory firms normally coordinate the due diligence process and manage the data room areas covered by a due diligence process may include financial information reporting corporate structure contingent liabilities Capital commitments sales and marketing matters supplier details borrowings tax legal information related party transactions and Arrangements commercial aspects generally Insurance distribution environmental and management employees and superannuation land buildings plant and Equipment intellectual property material contracts Trade Practices Privacy Information techn Tech ology research and development grants risk management quality assurance and occupational health and safety that should just about cover it all and there may be anywhere between 10 and 100 questions on each of those categories depending on the business the complexity of it and how rigorous the buyer process is they may Outsource all of that due diligence to third parties or they may do it all in-house so when summary the due diligence process is an essential part of every business sale and acquisition process and it is done for everyone's benefit if the business is in good shape and has been represented fairly and its recordkeeping has been properly maintained then it should present no impediment to the sale transaction with any issues arising from the due diligence process being minor and easy to overcome if you found this video helpful please give it a thumbs up this video and many others can be viewed from our website Tony brown.net bye for now