Once the Heads of Terms are signed, the Due Diligence (“DD”) process begins. This is the buyer’s opportunity to have a detailed look at the business, reviewing everything from financial and tax position to employees, contracts, and customers. Think of it as looking under the hood of the business, how it works and any potential issues that could arise.
It is also an opportunity for the seller to disclose information that may be relevant to the buyer and that might not be obvious from the documents provided. Doing this early can prevent issues later on in the process or after the sale.
The DD process can be an intense period for both the sellers and the business, especially if not prepared for it. It can require significant time and effort from key staff of the business such as your accountant or HR manager who may not directly benefit from the transaction. It will require them to be discreet to avoid disrupting the business or the deal.
It is important that key staff are brought into the transaction early, to help this process go smoothly, and it is not uncommon for these individuals to be rewarded for their efforts through bonuses or other incentives.
Professional advisers play a critical role in the process, answering complex questions, managing outsourced areas of DD with accuracy, speed and aligned with your requirements.
