A due diligence checklist is a crucial component of the M&A process. It helps acquirers avoid costly and time-consuming mistakes by revealing the company’s liabilities, unreliable contracts, intellectual property concerns, litigation risks and more. It also helps them determine whether the deal is the right fit from a cultural perspective.
In the process of creating a Due Diligence Questionsnaire (DDQ) is an overwhelming task, particularly for small-scale business owners who have never done it before. It’s crucial to be thorough, but not too overpowering that the company becomes unable to respond to it.
The list of documents needed can be extensive, but there are a few essential guidelines that must be met. Included are three to five years worth of financial reports, tax returns including employment contracts, insurance policies and copies of the operating agreement or bylaws.
These could make the DDQ more efficient, both for the seller and the buyer. It can also help to reduce the chance that sensitive information is shared without appropriate security measures in place.
The process of due diligence can be stressful but with the proper plan it can be made as easy as possible. Your M&A advisor can assist you in identifying documents that buyers will likely request. Prepare these documents in advance so that the sale process can be completed quickly. For more information on how to prepare your business for an effective sale, contact the Allan Taylor & Co team today!