Don’t make the mistake so many company owners have
Survey after survey of private business owners confirms a common theme. That is the majority of them are not happy with the outcome from the sale of their business. How is this possible when many of these companies were well run? The answer is that just because your company is performing well today for you, that does not directly translate to successfully being able to withstand the due diligence a future acquirer will put your company through.
Here are just a few examples of problems that arise during due diligence of even well performing companies:
- When the acquirer conducts a Quality of Earnings assessment during due diligence, they uncover issues that the seller wasn’t aware of
- The financial statements are not formatted to what an industry acquirer would expect to see. Example: how you calculate gross profit is different than the norm for your industry
- The forward-looking growth projections are not effectively backed up by a solid and proven sales pipeline. The acquirer therefore has concerns about growth prospects of the business going forward under their ownership
- Key employees receive above market compensation, benefits and perks that the acquirer won’t want to continue supporting going forward.
This list could continue on but you get the idea. The solution is conducting a Due Diligence Readiness Assessment at least 1 to 2 years PRIOR to beginning your exit process. This readiness assessment will most likely uncover gaps that could be time consuming to address and/or you’ll want to correct the gap(s) and will need to show sufficient historical performance before the acquirer will believe the issue has been addressed.
We work with clients leveraging our Due Diligence Readiness Assessment tool, contact us today to learn more about how it can help you on your journey to a future euphoric exit.
