Yorkshire and North East Dealmakers Guide 2016 - 26
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SELLING YOUR BUSINESS
Be open, honest, prepared
Anyone selling their business needs to be prepared for the closest of scrutiny; having every aspect checked and double-checked.
We look at how a seller's own due diligence (pre-sale) can be used to positively influence the value of the their company
D
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DUE DILIGENCE
ue diligence involves a buyer
taking a deep look into the
financial trading history and
financial stability of the company
they're buying. The aim is to expose
any elements of the balance sheet that
might affect the valuation of the business. It is designed to satisfy the buyer
that the business is in the healthy
state that it claims to be in.
From the seller's perspective, if
nothing untoward is discovered, you
give the buyer no reason to downgrade the value of the deal. From a
buyer's perspective, it reassures that
the business is worth the investment.
Due diligence is an essential part
of the sale process, particularly when
there is a private equity element to the
sale. In these cases, the seller (the
owner) will often conduct their own
due diligence, even before the company is put on the market. Carried out
by their financial advisers, this exercise
will provide the owner with the real
pointers to where the strengths and,
perhaps even more importantly, the
weaknesses that can have a negative
impact on any future sale.
One of the great benefits of this
early self due diligence is that it gives
sellers greater control of the process,
rather than handing over the initiative
to potential buyers. The report can
be used as an honest analysis of
the state of the business, linking the
financial strengths set out in the Information Memorandum to the historical
trends of the business as set out in the
business plan.
So what might a seller's due diligence
uncover? This is a question that a
business owner needs to consider
carefully, as the process will be shining
a light into what could be the dark
recesses of the business and these
may hide some awkward skeletons.
These can be inconsistencies in the
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