The Importance of M a Due Diligence
Due diligence is a procedure that buyers follow to understand the seller in business transactions, such as mergers or acquisitions. This review is carried out through an array of questions and documents that buyers request from the seller. A thorough M&A review can help a prospective purchaser identify key information about the target company. However, the process has its own challenges.
Due diligence can be expensive and time-consuming. Based on the complexity of the transaction, it could take weeks or even months. In addition, due diligence can require a large team of experts from CPA firms for due diligence on financials, to industry experts to analyze the business model and future opportunities including labor lawyers and environmental consultants. The experts will spend a large amount of time on site at the main headquarters going through documents and information.
It is crucial for sellers to be aware of the nuances of a due diligence procedure and prepare appropriately. Consider your negotiation strategy, and prepare the necessary materials to study. It’s also important to keep an your emotions out of the negotiation process, in order to negotiate objectively.
Brett Dearing, an M&A expert, provides insight on the importance of due diligence in the M&A procedure. In this fourth installment of PitchBook’s Mergers and Acquisitions 101 series, Dearing explains how M&A due diligence can reveal risks, verify valuation and ensure that the investment criteria of the company being targeted are met.