Due diligence usually occurs after the letters of intent are received by the transferor. This in-depth audit phase can have a decisive influence on the further negotiations and the completion of the transaction. Here is the main thing to remember about its course and its implications.
A structuring audit for the buyer
Due diligence enables the potential buyer to :
• Validate the information provided so far by the seller
• Deepen your understanding of the business (strengths, weaknesses, risks)
• Identify vigilance points that may affect valuation
• Prepare firm offer, if interest is confirmed
• Secure the transaction through asset and liability guarantees
• Justify the price to potential financial partners
Multi-thematic audits
Due diligence covers all strategic areas of the company:
• Legal: structure, litigation, contracts, insurance, sensitive clauses
• Financial and tax: balance sheets, treasury, debt, BFR, tax bundles
• Operational: organization, business model, information systems, performance
• Human resources: organization, management, remuneration, key people
• Environmental & ESG: compliance, risks, maturity of practices
The extent of due diligence depends on the size of the company, the complexity of its business and the quality of the information available.
Vendor Due Diligence (VDD): anticipate to sell better
When the company is large, the seller can initiate a Vendor Due Diligence. Carried out by an independent firm, this VDD helps to structure the information to be transmitted to acquirers and to gain in fluidity. It is an investment, but often a transfer accelerator.
The concrete process of due diligence
The acquirer commissions several experts to analyse the various aspects: financial, legal, tax, HR, ESG, environmental audit... Everything is organized around a data room, with Q&A sessions, appointments with the management and even site visits.
Clear governance and a dedicated sales contact are essential to smooth trade.
Three possible outcomes
1. Vigilance points appear, but remain treatable: adjustment of price or conditions.
2. Major anomalies call into question the operation: project abandoned.
3. The audit confirms expectations: issuance of a firm offer.
In short
Due diligence is a structuring step in the disposal process. Well anticipated, well documented and well managed, it helps to secure the transaction, speed up discussions and protect value.
At Mentorium Partners, we support managers and shareholders in the preparation and management of these key stages. Because a well-orchestrated process is also a better defended valuation.
