Do You Want To Sell Your Company? —What Is Due Diligence?
After the buyer submits an interest to sell, or what is called the letter of intent, a proposal is prepared that provides due diligence items that are important for this strategic buyer to better understand the seller’s company.
The letter of intent, as better known as LOI, sets for the general terms and conditions that are necessary to be analyzed for the continuation of the process which leads to the ultimate transfer and sale of the company.
The letter of intent will involve the due diligence timeline and general steps. In addition, what needs to be resolved before a transaction can take place, most importantly, is the fact that the letter of intent will be specific on the price and the type of sale, stock vs asset. Normally, the buyer will also include where the money is funded including the sources and uses of the funds.
Always understand that no two transactions are the same. The buyer, whether it be a private equity group or an individual representing himself or his company, will have the same concerns.
Be careful of obligating yourself to the terms and conditions of the letter of intent with a buyer group that you have not investigated. Asking the buyer group of some basic question like what transactions fails in the due diligence process and what are the causes, and simple questions like the turnaround time on reviewing documents and who in their team does the due diligence.
The letter of intent set the terms and conditions for moving forward but can be suspect and can ultimately take the company “off the market” and prevent the seller from evaluating other more qualified buyers for your company.
CBS-Global can assist you in consulting with you in your exit strategies in making sure it meets all your goals and expectations.
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