As M&A deals become more competitive, buyers are taking steps to close transactions as efficiently as possible. That’s why private equity firms conduct sell-side due diligence, a process that can increase the odds of a smooth, successful sale.
Sellers find that this type of pre-qualification has many benefits. Uncovering potential risk areas before going to market prepares the management team for the buyer’s due diligence process. If done far enough in advance of a transaction, sellers can fix problems or position an issue appropriately for a potential buyer. What’s more, an independent, third-party presentation of the seller’s financial and tax results accelerates the buyer’s due diligence because the seller already has a report with the data the buyer is going to ask for.
There are two major areas where sell-side due diligence can uncover details that directly impact selling price: quality of earnings and taxes.