By Gabriela Silvestris, Director, Equiteq
A no-surprises and smooth due diligence (DD) process underpins every successful deal, closed on the terms agreed before exclusivity. Ideally confirmatory in nature rather than a voyage of discovery, DD provides comfort to the potential acquirer and helps the vendor agree a better set of share purchase agreement warranties and indemnities. On the flip side, material surprises can lead to adverse re-negotiations and a drawn-out process can be distracting and lead to financial under performance.
There is a golden rule in M&A: issues will fill the available time. Being well prepared and due diligence ready is key to driving a fast completion process, protecting value and shoring up buyers’ confidence.
In some jurisdictions, commissioning vendor due diligence is quite common. It enables sellers to manage the timetable, better prepare for buyer due diligence and by disclosing reports to the final shortlisted parties, mitigates issues while there is competitive tension in the sale process. As ever, the benefits need to be weighed against the costs.