Yorkshire and North East Dealmakers Guide 2016 - 28

DUE DILIGENCE 28 SELLING YOUR BUSINESS company's financial reporting regime, so the owner should ensure that the quality of the information provided for buyers is fit for purpose. Uncovering these issues early and being able to correct and rectify them will save time and costs later on, as well as the risk of a devaluation of the business being reduced. Advisers often say the supply of accurate information at the due diligence stage will ensure the valuation remains at the required level. The scope of a seller's due diligence should include any liabilities such as staff pensions, disputes with any major clients and bad debt issues. The extent to which the business relies on the owner (for client reassurance or market knowledge) and the weakness of the management structure beneath the owner, will impact on the attractiveness of the business for the buyer. Legal aspects are imperative. Ensuring that data protection, anti-bribery, employment policies and health and safety procedures are robust will have significant benefits. It is also wise to carry out a full review of Companies House records, as well as ensuring any regulatory legislation is fully complied with (depending on the sector the business operates in). Good legal advice will be worth investing in to have all these issues ironed out. The time invested in the due diligence at this early stage will be well worth it as the sales process ©shutterstock.com gets under way. For one thing it will significantly reduce the time spent constantly answering questions posed by the potential buyer. Despite it being time-consuming and potentially distracting for the owner and the management team, early due diligence by the seller will free up management time to concentrate on the day-to-day running of the business during the sale process. It can be argued that the smaller the business the more important the seller's due diligence becomes. The cost and time involved in preparing a business for sale can have less impact on the business at the point of sale if seller due diligence is done in advance. Of course, a seller will often want to conduct due diligence on the potential buyers. An owner may well have built the business from scratch, have a loyal workforce and will have a clear incentive not to sell to anyone who doesn't have the true ethos of the business and the welfare of the staff at heart. These things can be important. The buyer's financial status is crucial to ensuring that the sale progresses smoothly and they should be prepared to open up their books to any seller. Up-to-date records on the buyer's credit history needs to be scrutinised as closely as their business plans for the business. All this work will be made all the more easy and robust with the support and assistance of good-quality advisers, with strong credentials and track records in supplying due diligence work for selling companies. http://www.shutterstock.com

Table of Contents for the Digital Edition of Yorkshire and North East Dealmakers Guide 2016