Insights | Blog
Due Diligence and the Importance of Conducting Yours
Buy and sell side transactions are an opportunity for middle market shareholders to greatly enhance their enterprise. In fact, these transactions can often be the most important milestone in any given year. As a result, due diligence employed prior to structuring and closing such a deal will directly impact the success or failure post close. The stakes are high and failure is not an option. Finding the right partner or expert to conduct such an important financial analysis on your behalf is vital.
For example, what type of experience does a consultant possess? Do they have a tangible track record of initiating deals and, moreover, have they worked not only on behalf of clients but also in corporate leadership roles – for example as middle market CEOs, shareholders and CFOs? Do they understand how to uncover the real value and the result?
Also keep in mind that your financial analysis may begin in the finance and accounting area but should also include interaction with the “heartbeat of the business”. The heartbeat is different from business to business, but it may be one of, or a combination of, the manufacturing processes, domestic and international procurement procedures, an assessment of the marketing and distribution channels, or something else. For example, because healthcare continues to rise and often represent a larger piece of the overall cost structure, it is important to review this cost center and undercover the facts which often lead to an opportunity. The IT infrastructure is another cost center that should be assessed to ensure a smooth transition post close. This includes analyzing the hardware and software capabilities and compatibility. Your due diligence should look closely at all third party IT outsourced contracts and often find “overlapping ” expenses that can be phased out to enhance future EBITDA.
Finally and ultimately, seek out financial counsel that brings a collaborative approach and unwavering commitment to the task at hand. Your business is your lifeblood. You want a difference maker possessing expertise and insight; a financial expert who will create value and get the job done right.