Rather than waiting for problems to arise in an M&A transaction, many business owners are increasingly choosing to conduct due diligence on their own company – long before the sale process starts.
Traditionally, the buyer would be the one having a potential acquisition evaluated. However, many sellers are being proactive about evaluating their own businesses in order to address problems before they arise. This practice of “sell-side due diligence” gives business owners an unbiased, critical view into their company processes and the opportunity to adjust as needed to enhance value for future sales.
In this article, we are going to discuss five compelling reasons you should be hiring professional valuators to analyze your business before the sale happens.
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Reduces Risk in the M&A Process
You know what they say – by failing to prepare you are preparing to fail.By conducting a business valuation before the sale process starts, sellers can risk in the M&A process by preparing for issues before they come up. The examination tends to be an eye-opening way to reveal issues you might not have been aware of previously.
When you have prepared ahead of time, you are mitigating risk of unforeseen problems coming up during the process.
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Allows You to Enhance Value and Course Correct
A business valuation prior to sale can also help you enhance your business’s value and potentially get a higher sale price than you would have before. When you conduct your sell-side due diligence, it may reveal value-enhancing opportunities, allowing you to course correct and raise your value before entering into negotiations.
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Avoid Surprises By Being Upfront about Issues
When you do sell side due diligence, you become aware of every issue that could come up in the negotiation process. By bringing any potential issue up with a buyer before they can find it, you’ll show that you are credible and trustworthy. This only helps in the deal making process and can smooth things over before they cause talks to stall.
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Allows for Unique Owner Insight
You know your company better than anyone. But even as the owner, it can be hard to be truly objective. A deep dive into your company value will give you insights that allow you to make your business even better than it is and increase your value before your planned exit. You will have more time to “move the needle” on value-add things before entering into negotiations.
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Smoothing and Streamlining the Negotiation Process
One of the hardest parts about M&A negotiations is the long back and forth. This can sometimes bring about “deal fatigue” and cause problems for both sides. But, if you already know the potential issues, the buyer due diligence will become a mere technicality rather than waiting for an unwelcome surprise.
These are just a few ways that pre-sale due diligence on your own company can enhance value, reduce risk, and allow you to enter any M&A transaction with confidence. We hope this information was useful to you. As always, when conducting these kinds of valuations, it’s better to rely on professionals who can offer you critical insights and thorough analysis.
