M&A Insights – Mark Young, Managing Partner, CKS Advisors
Welcome to the June 2021 edition of M&A Insights. Our goal at CKS Advisors is to help you stay up to date on the Mergers and Acquisitions climate.
This month, we highlight the value of a business owner performing sell-side due diligence prior to the sale of their company.
What is Sell-Side Due Diligence?
- Sell-side due diligence, similar to the due diligence buyers perform on companies they purchase, is a process in which the business owner (seller), typically with the help of M&A professionals, takes a critical look at their own company.
- Looking at your company through the lens of a buyer, you can identify both the strengths a buyer would be seeking and potential issues and risks.
Benefits of Sell-Side Due Diligence:
- Identifying key issues before being under the buyers’ microscopes provides a business owner with the opportunity to work on accentuating the positives and develop strategies to address/mitigate the negatives/risks. Doing so can make your company more attractive and potentially maximize value when it comes time to sell.
- Knowing what the buyers like to see from a company like yours will allow you to better present your company, increasing the potential for attracting more, better qualified buyers.
- Having completed a due diligence process before the buyers start theirs creates the opportunity for maximum transparency, which increases credibility and buyers’ confidence in the validity of the information being shared.
Key Areas Addressed in Sell-Side Due Diligence:
- Attractiveness of the company’s characteristics including management team strength, niche, growth rate/growth opportunities, types of revenue, and customer mix.
- Level of financial sophistication including measuring the investment the company has made in quality financial statements, reporting capabilities, and financial metrics.
- Scalability including the level of professionalism within the company as well as the quality of processes and procedures.
- Potential risks ranging from typical industry risks to company level risks such as customers issues, product/service problems, and issues with operations.
In Summary:
- In conducting sell-side due diligence, a business owner has the opportunity to remedy or at least mitigate issues/risks that could cause a buyer to either discount a company’s value or cause them to lose interest.
- How many times have you heard when selling a home “… hire a home inspector before putting your house on the market”. This is the same concept – but there’s just a lot more riding on a clean buyer inspection.
- As a seller, uncovering issues before buyers do can make a world of difference in the outcome of a transaction.
If you would like to learn more about sell-side due diligence, the M&A market in general, or are ready to take the next step to explore your options, we would be glad to meet. Please contact me at 480-351-8533 or myoung@cksadvisors.com.
This post is for informational purposes only and does not constitute an offer, invitation, solicitation, or recommendation to buy, sell, subscribe for, or issue any securities. While the information provided herein is believed to be accurate and reliable, CKS Advisors, LLC and Ashland Securities, LLC make no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. All information contained herein is preliminary, limited and subject to completion, correction or amendment. It should not be construed as investment, legal, or tax advice and may not be reproduced or distributed to any person. Certain Principals of CKS Advisors, LLC are registered representatives of Ashland Securities, LLC Member FINRA, SIPC. CKS Advisors, LLC and Ashland Securities, LLC are separate and unaffiliated entities. Securities and Investment Banking Services are offered through Ashland Securities, LLC.
