Due Diligence

When you and your acquirer have agreed a sale price for your business, your solicitors and your acquirer’s solicitors will draw up a Heads of Terms document.

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Due Diligence Preparation

When you and your acquirer have agreed with a sale price for your business, your solicitors and your acquirer’s solicitors will draw up a Heads of Terms document. The Heads of Terms is a broad outline of what the final sale and purchase agreement (SPA) will contain – the SPA is the legally binding contract covering your responsibilities as the seller and your acquirer’s responsibilities as the buyer.

There will often be differences between what’s in the Heads of Terms and what’s in the SPA. More often than not, these differences will be because of discoveries made by the seller during the due diligence process.

What Purpose Does Due Diligence Serve?

The due diligence process is there to protect the acquirer. It allows them to know everything they’ll be buying when they take over your company – your intellectual property, your staff, your customer database, the relationships you have with your suppliers, and more.

During the discussions leading up to the handshake between you and your acquirer, it’s impossible to cover in granular detail every aspect of your business. You will have been honest, transparent, and truthful with your acquirer on the broad strokes of the deal but, from the point of view of the acquirer, there may be hidden landmines in your business that you are not aware of.

Those landmines may cause the acquirer to lower their offer or to abandon the deal completely.

The due diligence process is fraught with complexity and complications. When you engage IBA Corporate as your business broker, we work with you, your accountants, and your solicitor to ready you for the due diligence even before we have begun to seek an acquirer. What will we be helping you to prepare for the due diligence process?
Why you need to be ready for Due Diligence?

Your Due Diligence Checklist

Depending on the size of your deal, your solicitor or your acquirer’s solicitors may wish to set up a “data room” – this is often a security-protected room in which all due diligence documentation is kept for inspection. The acquirer’s solicitors visit the data room to get the information about your company they then provide to their client.

On smaller deals or when a solicitor has an online portal set up to provide this service, due diligence documents will be kept on a password-protected secure server.

Your IBA Corporate representative will gladly inspect the due diligence documentation bundle as it is built and they will provide guidance on any further information they believe a future acquirer may need.

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What's In The Checklist?

Upon engagement with IBA Corporate, we recommend strongly that you, your solicitors, and your accountants start to assemble the following:

Financial Statements

Company Documentation

Company Heirachy

Intellectual Property

Business Contracts

Legal Disputes

Dept Facilities

Compliance Requirements

The Checklist In More Detail

Upon engagement with IBA Corporate, we recommend strongly that you, your solicitors, and your accountants start to assemble the following:

Keeping Documents Up To Date

You should keep your due diligence documentation up to date every month. Due diligence can go on for months and you will often find that, if the acquirer’s professional representatives request the same documentation again two or three months after their initial request, the details have changed.

When Due Diligence Is Underway

When due diligence is underway, you may receive an avalanche of requests for documentation within a short space of time from the acquirer’s professional representatives and then receive requests for nothing for two to three weeks afterwards.

There will be times when you are frustrated by the due diligence process. There may be other times when the behaviour of the acquirer’s solicitors is aggressive and you feel that your honesty is being questioned.

Try not to take any requests, no matter how curtly worded, personally. Your acquirer’s solicitors are trying to protect their client’s interests.

Please do not forget that it is your job, through due diligence, to provide guidance to the buyer on what exactly he or she is buying. Being vague in your responses or not responding at all introduces doubt into the mind of the acquirer and their professional representatives – it will harm the credibility you have built up and imperil the deal.

By keeping your documentation up to date, you to provide the acquirer with the information they need, you’ll retain their confidence, and you’ll move one step closer to completion day.

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