In the first part of this blog series, we discussed how to turn your budget from a risk into a strength. In this second part, we’ll focus on what is perhaps the most intensive phase of the sales process: due diligence. How do you prevent this phase from turning into a nightmare? And how do you stay focused and keep your eyes on the finish line?
The bids have been submitted, and as an entrepreneur, you’ve made the difficult decision about which buyer will take over your company—and, with it, your legacy. From here on out, it seems like a formality. In practice, however, this phase often falls short of expectations, as questions continue to pile up. On the buyer’s side, there may be four accountants, ten specialized attorneys, and three tax specialists involved, and it sometimes feels like the end is never in sight.
How do you prevent imbalance and avoid deal fatigue? We’ll discuss three common stumbling blocks and how to avoid them.
1. Inadequate (financial) preparation
Many entrepreneurs choose to set a solid growth forecast at the start of a transaction. A good start is half the battle, especially when it comes to due diligence. That start doesn’t come after signing the letter of intent, but as early as the drafting of the information memorandum.
Ensure that all key analyses are included, correctly prepared, and that the underlying data is easily traceable.
At Hogenhouck M&A, we support entrepreneurs in this process with practical expertise. We assist in preparing and clearly positioning the right analyses. In addition, we work together to build a meticulous and well-organized data book, ensuring that all information is immediately accessible to the buyer.
Also, prepare a well-stocked virtual data room in a timely manner. In practice, we see that entrepreneurs are often caught off guard by questions, even though 90 percent of that information recurs in every sales process. Based on an industry-standard checklist, we ensure that all necessary information is collected, verified, and uploaded on time. This prevents confusion, saves time, and reduces the risk of deal fatigue.
2. Late and careless responses to Q&A questions
As soon as the due diligence process begins, the intensive Q&A phase kicks off: a digital question-and-answer system in which buyers delve deeply into your business. This is often followed by expert sessions in which the buyer’s specialists ask additional questions. This is where things frequently go wrong:
- Questions are answered evasively or carelessly;
- Minor risks are unintentionally exaggerated by ill-considered answers.
Both situations lead to friction or even a breach of trust. That is why we ensure that:
- You have early access to the questions;
- Your answers are well-prepared and strategically worded;
- Potential risks are identified early on and placed in the proper context.
This will help you get through the audit faster, more efficiently, and with better control.
3. Lack of strategic alignment
All too often, we see parties begin their financial review without a clear strategic alignment. Yet this is precisely what forms the foundation of every deal. If, during due diligence, it becomes apparent that the strategic rationale is shaky, all the preparations, late nights, and expert sessions will have been for nothing.
Unexpected issues will always arise. But when both parties have a clear understanding of the strategic rationale, it’s easier to navigate the bumps along the way. That’s why we believe it’s crucial for you and the buyer to have a thorough and realistic discussion in advance about your shared strategy and vision for the future. Only then can trust be built, and you can prevent the deal from falling through prematurely.
The best outcome and the highest level of certainty
Do you want to pass the due diligence process with flying colors, without delays or disappointments? Then preparation is key. At Hogenhouck M&A, we’ll guide you through the process step by step:
- We provide a comprehensive and error-free data room
- We manage the Q&A process, both operationally and strategically
- We ensure strategic alignment
- We'll help you stay on top of the timing, content, and results
This way, you stay in control and increase the chances of successfully closing your deal.
Curious about what we can do for you? Feel free to contact us with no obligation. We’d love to get to know you.
