How does the due diligence process work?

Описание: The due diligence process in a small M&A transaction involves a thorough investigation and review of the target company's business, financials, operations, legal, and regulatory compliance. The goal is to identify potential risks, liabilities, and opportunities associated with the transaction. While the process can vary depending on the size and complexity of the deal, it generally consists of several key steps:

Preparation: The seller will also prepare a data room or a secure online platform to share relevant documents and information with the buyer.

Document requests and review: The buyer's team will request various documents and information from the seller, including financial statements, tax records, contracts, employee information, intellectual property, and regulatory compliance. The buyer's team will then review these documents to assess the company's financial health, growth potential, risks, and any undisclosed liabilities. For sellers, it’s good to have many of these documents already in a data room, which expedites the process and makes the seller appear organized and professional.

Financial and operational analysis

Legal and regulatory review

Site visits and management meetings

Issues resolution and renegotiation: If any issues or concerns arise during the due diligence process, the buyer and seller may work together to address them or renegotiate deal terms, such as adjusting the purchase price or including specific representations and warranties in the final agreement.