A due diligence checklist is an essential element of the M&A process. It helps acquirers avoid costly and time-consuming mistakes by revealing the liabilities of a company, insecure contracts, intellectual property issues, litigation risks and more. It also assists them in determining whether a deal is an appropriate fit from a cultural perspective.
Creating a Due Diligence Questionnaire (DDQ) is an overwhelming task, particularly for small-scale business owners who’ve never ever created one before. It is important to be thorough, but not too in the sense that the business is not able to answer it.
The list of documents that are required can be extensive, but there are a few essential demands that are always included. Included are three to five years’ worth of financial reports, tax returns and employment contracts, insurance policies and copies of the operating agreement or bylaws.
These could make the DDQ more efficient both for the buyer and seller. Additionally, it can reduce the chance of sharing sensitive information without appropriate security measures in place.
Although the due diligence process can be stressful, with proper planning, it can be simplified and as simple as is possible. Your M&A advisor can assist you in identifying documents that buyers are likely to need. Prepare these documents in advance so that the sale process can go ahead quickly. For more information on how to prepare your company for an efficient sale, get in touch with the Allan Taylor & Co team today!