Once the
Offer to Purchase a business is reached, we must begin the
next phase, called Due Diligence.
This is the period where we will actually inspect the company.
This is not just a verification of the company's financial statements, but is the period where we have the opportunity to truly determine if it is a "good" business. The Due diligence period is the time to check out everything, not just the financials. The Due Diligence period allows us to learn enough so that we can begin to formulate plans once settlement is reached, and we take over.
An important point to consider is being sensitive to the Seller's concern about confidentiality. Quite often, they will not allow the type of access desired to complete the process, but it is something we need to address and work through with the Seller so our investigation can be completed thoroughly
In order to conduct an effective Due Diligence, we need to verify that the information provided is accurate, and endeavour to find any problems within the business. This is the time to really "check it out," to determine what is the "heart of the business", and identify what opportunities are available to exploit, and to help grow the business.
There
is one area where we must show restraint: we must not allow
our enthusiasm to pollute our judgment. It is natural to be
excited about the business and the prospects for the future
but we must not get passionate about the business yet.
During Due Diligence, we must gear our passion towards discovering
everything that we can about the business and nothing else!
Keep a clear head to ensure that a sound decision about the viability of the business can be made and evaluate each aspect with complete objectivity.
Points to be covered include;