Due diligence is your one and only opportunity to explore the risks, pitfalls and opportunities of buying a business or company. Until this point in your negotiations, the seller has held most of the cards. You need to be satisfied that, as far as possible, you know exactly what it is you’re buying. That’s where our due diligence experts can help.
who does the due diligence?
Typically the scope of work falls into three areas:
- financial, completed by us
- legal, completed by your lawyer
- commercial, usually completed by you but Mitten Clarke can help.
what should we concentrate on?
First of all we need to identify those risks, pitfalls and opportunities. These may include factors such as:
- customer loyalty
- lucrative contracts
- product quality
- culture and attitude
- key people in the organization.
Once we understand these factors, we’ll then pull together a programme of work, concentrating on the high risk areas, eg where the quality of information supplied is weak.
quantifying the true cost
In the excitement of looking at a new opportunity it’s easy to overlook hidden costs such as:
- remedial work you may be responsible for
- potential redundancy costs
- onerous lease obligations such as dilapidations
- litigation pending.
When you buy a company, you buy it ‘warts and all’.
So for that reason, you need to protect yourself properly and quantify the extent of your liabilities.
Also, we need to check that the synergies you’ve identified do exist. From our experience, synergies can sometimes be like unicorns – everyone knows what they look like but surprisingly no-one has actually seen one!
working through the process
This is the time to get the awkward questions on the table, and you can use us as a buffer between yourself and the vendor. Our Staffordshire offices are open to you if you need them for any meetings. It’s much better to ask them at this stage, than after you have done the deal.
It’s also a good time to be shaping your implementation plan. You need to be thinking about:
- the announcements
- quick wins
- roles & responsibilities – eliminating duplication
- marketing strategy
- integrating IT and systems.
There’s a great deal to do, and the most successful acquisitions are often those with a well thought out implementation plan.
evaluation and negotiation
Once the due diligence is complete you’ll be able to re-evaluate everything objectively. Some of our findings will be positive, and some not so positive.
If the risks are low then you may be happy to proceed with the offer. If the risks are higher then you may need to change the shape of your offer, or you might decide to walk away.
how can Mitten Clarke help you?
We have a great deal of experience in providing due diligence services. We also have an excellent network of professionals such as lawyers and bankers for you to call on, if needed.