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“There is hardly any place or any company where you may not gain knowledge.
Almost everybody knows some one thing and is glad
to talk about that one thing.”
Lord Chesterfield
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PRE-DUE DILIGENCE

A potentially huge value added benefit to our “Business Health Check-Up” clientele is the “Pre-Due Diligence” kicker.

“Due Diligence” is the term that is used to define the investigative process that is or should be completed by a buyer of a business prior to closing the deal.

The “Due Diligence” period is a very risky period in the deal process. Most deal “blow-ups” occur during the “Due Diligence” process. A rough overview of a deal to buy, sell or merge is as follows:
  1. The parties (prospective buyer and prospective seller) meet.
  2. The asset at point is inspected.
  3. Sale Price and terms are discussed and negotiation commences.
  4. Simultaneously, the “Due Diligence” process is commenced by the buyer. The buyer uses this process to “discover” seller alleged and/or factual misrepresentations – innocent or intentional. This process, when used by a skilled negotiator, can usually be twisted to establish decreased asset value differential between almost any seller asset value and a lower buyer asset value.

Historically, the “Due Diligence” process almost always drives down the asset at point value. Therefore, “Due Diligence,” while a natural and accepted stage of the buy/sell exercise, always favors the buyer.

The rarely used counter punch to the “Due Diligence” process is the strong and proactive, “Pre-Due Diligence” approach. There is a world of negotiation difference when, in step 4) above, the buyers “Due Diligence” is directly challenged by the sellers “Pre-Due Diligence” value support package.

It is particularly valuable when the seller has a comprehensive Profit Improvement analysis that has been the basis of seller Profit Improvement implementation.

With minor modification, the “Business Health Check-Up” Profit Improvement Report can easily function as the “Pre-Due Diligence” document that should, at a minimum, neutralize the force of a direct “Due-Diligence” onslaught.

On a best case basis a “Business Health Check-Up” report, properly implemented, can result in an improved capitalization rate factor and a corresponding sale price increase.

You’re in a good merger, acquisition or sale position with a solid “Business Health Check-Up” package in your arsenal.

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