A due diligence checklist is a vital part of the M&A procedure. It can help buyers avoid time-consuming and costly surprises by revealing the liabilities of a company and contract issues intellectual property issues and litigation risks. It also helps them determine whether the deal is suitable from a culture perspective.
The process of creating a due diligence questionnaire (DDQ) isn’t easy especially for small-sized businesses who have never had one before. It is important to be thorough but not so much that the company cannot respond.
The list of documents requested can be extensive, but there are some basic demands that are always included. This includes three to five years of tax return and financial reports, insurance policies or employment contracts, and copies of the bylaws or operating agreement.
These can make the DDQ more efficient, both for buyers and sellers. Additionally, it will help reduce the risk of sharing sensitive information without proper security measures in place.
Although the due diligence process can be stressful, with the right preparation, it can be streamlined and as easy as it can be. Work with your M&A advisor to identify what buyers will likely request and ensure that the documents are prepared ahead of time so the sale process can move forward quickly. For more information on how to prepare your business for a successful sale, contact the Allan Taylor & Co team today!
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