I had a conversation with a dealmaker the other day who said financial due diligence is one of the biggest hurdles in getting a deal over the line. For an SME, due diligence can be daunting and may even be overwhelming – especially if it’s being carried out by (say) a Big 4 firm.
While due diligence for buyers is a well established part of the deal process, vendor assistance is less well known. However it is becoming more common as it provides sellers with:
- Hands on support to meet the buyer’s information needs
- A fresh perspective and some challenge on the information being provided – but in a supportive environment
- Experienced help from someone who speaks the ‘same language’ as the buyer’s accountants; who can also be the conduit for providing information to them.
- Specialist support to deal with tricky areas such as calculating working capital needs.
- Better control of the deal process.
What’s the impact on the deal?
Vendor assistance should improve the buyer’s confidence in the numbers, speed up the deal and may protect or even enhance the final price.
It should also help dealmakers focus on the bigger picture and on maintaining relationships, as they shouldn’t need to get drawn into the detail behind the numbers. They are also more likely to be made aware of problem areas before they are raised by the buyer.
It may also create more bandwidth for management to keep the business on track.
Most importantly, it should improve the chances of getting the deal over the line.
Feedback I’ve had on vendor assistance includes:
- “Provided an essential service and honestly couldn’t have achieved the same result without him”
- “Thank you so much for all you have done during this often challenging time. We couldn’t have done it without you.”
- “His attention to detail is impressive, backed with clear advice and guidance making the whole process significantly less daunting”.
Covid -19 will probably make due diligence more intrusive and challenging than usual. Sellers are even more likely to need help.
The costs of vendor assistance should be small when compared to the amounts at stake. However it won’t always be needed – so I’ve created a tip sheet with 11 questions to help dealmakers assess their clients’ readiness for financial due diligence, which could be worth a read. If you’d like a copy then please e-mail firstname.lastname@example.org.