I met with a client a few weeks ago to tape a testimonial video. During the course of our discussion of the successful sale of his company, one of the topics we covered was the due diligence process. He put it simply when he said, “I had no idea how complex, detailed, and time consuming due diligence would be even though my deal maker warned me in advance what to expect. I am so glad that I had Generational Equity working with me to prepare me for due diligence.”
The key part of his statement relates to preparation. Most clients that I meet with post-sale tell me that due diligence was probably the most challenging part of the entire sales process. For those of you unfamiliar with the term, M&A due diligence is the process whereby a seller lifts the veil and the buyer is allowed to peer into the vital inner workings of your business. If you are not prepared for this, chances are good that the buyer will find something that you have not disclosed – good or bad – that may slow the deal down if not kill it.
The critical first step in the Generational Equity M&A process is a thorough and complete evaluation of your business. This allows us to start asking you questions about your company that will begin to prepare you for due diligence. Obviously the evaluation of every privately held company is unique to that company, your industry, and your specific set of circumstances. However, in general during our evaluation we will examine:
Again, this list is not exhaustive and does not include all of the areas we examine with our clients. Your specific situation may require us to delve into other factors and areas as well.
After the evaluation is completed and our client agrees with value and timing, we then take them to market and begin the process of looking for a buyer. But before we start this next process, our deal team does a second “due diligence” vetting and spends time working with the client to create an offering memorandum (OM).
The OM is largely based on the findings in the evaluation, but the deal maker will delve into even greater detail into any information that might lead him/her to believe that a “deal breaker” may be present. Again, this could be anything that is specific to our client’s company. Once the OM is completed and the deal maker is secure in his knowledge of the business and the company’s intangible assets (“off balance sheet” assets that specific buyers may find attractive), buyers are approached.
So you can see the first two phases in our process are designed to do two things:
A typical due diligence checklist that a buyer would present to a seller contains 200-300 questions. Some are very standard and easily answered and may have already been covered in the OM or evaluation. Others can be very detailed and require significant homework on the part of the seller. Common discussions may include:
Again, this is just a sample of the types of questions on a due diligence checklist. If you have done your homework, due diligence can be navigated successfully. Certainly using a reputable experienced M&A advisory firm like Generational Equity will help your chances of closing immensely. But even our deals often face hurdles because buyers can be very cautious, especially post-recession, to close a deal. In fact, due diligence is now taking 30-40% longer than it did just a few years ago. Buyers are out there and active, but they are just being extra careful to make sure that the targets they are buying will generate the ROI they need.
If you would like to learn more about due diligence or the entire process of successfully selling your company, I invite you to attend a Generational Equity M&A seminar. We hold these throughout North America and they are specifically designed to help you learn how and when to exit your business for the most profit.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2013 Generational Equity, LLC All Rights Reserved
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!Eric Erlandson, Owner, Action Fastenings, Inc.
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Dear Chris and Andre, I just wanted to say thanks for all your help. Even though this process was not an easy one, it was comforting to know that I had a capable team standing beside me. You made me feel like we were almost your only client or at least the most important one. Thanks again, and I will recommend your service in the future.Shenille Engelhart, Owner – CLS Technology
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
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