Trying to sell your business? Imagine you are selling your house… our views in The Telegraph
posted 6 Sep 2015, 10:58 by Peter Chadha
Excerpts from that interview are below. These apply to the general principles of due diligence - but if you're interested in know IT Due Diligence specifically -check out our video linked.
Due diligence is an essential process for prospective buyers of businesses. It’s the best way to formally verify the company information provided to you, and it is the main way for investors to avoid burnt fingers on an over-eager acquisition.
Dr Peter Chadha, CEO of DrPete Technology Experts, has undertaken due diligence for a number of acquisitions and says that, in many ways, selling a business is like selling a house.
“You either sell it in a good condition and get the best market price you can,” says Dr Chadha, “or you sell it as a ‘doer-upper’ and declare that to potential buyers.
"It is generally better to declare everything up front, and then it will be reflected in the price.”
Even when selling businesses that are healthy and robust, it will take time to ensure that the organisation is in a fit state for sale, requiring the help of accountants, lead sales advisory specialists and IT specialists to perform what is known as vendor due diligence.
Provide all information clearly and in good time, as a mess of facts and figures is a signal that your house is far from in order
This team will go through a process of business optimisation, producing a cohesive and documented business strategy, clear and healthy financials, detailed information on your people and plant, and finally confirmation that IT systems work and are up to date.
This information will need to be presented in an organised fashion and made available in a virtual or real data room, where potential buyers can view the information and cross-check it with their own due diligence.
In the case of the “doer-upper” business, says Dr Chadha, the vendor still needs to prepare information, but prospective buyers may be more tolerant.
However, if you sell the business with known issues, you may need to invest in equipment or IT systems, or you may have liabilities. Honesty really is the best policy.