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:
- The parties (prospective buyer and prospective seller) meet.
- The asset at point is inspected.
- Sale Price and terms are discussed and negotiation commences.
- 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.