Sell-side diligence not only provides benefits which diligence providers have preached numerous times, but can uncover several surprising advantages that will help you prepare for the divestiture.
- First, sell-side diligence sets up a framework for sellers, management, and the investment bankers to use throughout the divestiture process. By having a solid framework, the buyer sees more credibility in the financial statements and in management, which results in all other information provided by management to appear more credible. Sell-side diligence not only provides benefits which diligence providers have preached numerous times, but can uncover several surprising advantages that will help you prepare for the divestiture.
- Second, sell-side diligence identifies and addresses issues you or management may not have considered by looking through a buyer’s lens. We found that management provided much more candid responses during sell-side diligence than buy-side diligence, which can only prepare a Company that much more when going to market.
- Third, sell-side diligence provides an independent perspective on the Company. Whether management ran the business from a sales perspective rather than a financial perspective, or simply never prepared detailed analysis on its results, sell-side diligence can uncover value that directly impacts the valuation and modeling of the company on all three sets of financial statements.
- Fourth, the buyer and investment bankers surprisingly place heavy reliance on the sell-side diligence report. The buyer has fewer questions to ask and a solid base for their projections and the investment bankers rely on the financial numbers in the diligence report for their modeling.
All in all, sell-side diligence results in shortened transaction time, an increased likelihood of deal completion, and enhanced transaction. However, these unadvertised benefits of sell-side due diligence are key drivers in closing the deal.