So here you are. You’ve decided to sell your business and now you’ve got bankers, lawyers and your management team focused on getting a deal done. Money is being spent. The best people you can find are helping. Buyers are interested because you built a great company. Offers are on the table and terms are being discussed.
Bam. A 20-page due diligence list arrives requesting all of the information and data that your buyer wants to review while preparing a final term sheet and closing a deal.

Holy crap – that is a lot of info and digs into the deepest recesses of the company. A financial and operational “strip search”, if you will.

While due diligence can be one of the most painful, and least glamorous parts, of finalizing a transaction, it can also make or break your company value. The good news is, when managed properly, the diligence process can support, and even increase value. So how do you make sure this process reinforces the value you’ve built in your business?

1. Be honest and upfront with potential buyers, right from the start. Make sure the data reflects the conversations…discrepancies found during diligence provide an opportunity to negotiate (usually downward).

2. Show that you respect their requests and process by responding to every item on the list. Even a simple statement with your ability to supply the information. In some cases, you may not have the information requested. No shame there, but don’t skip it.

3. Organize the data room to match the buyer’s outline for easy access to information. This shows the buyer your company has its act together and is on its game.

4. Start now. Preferably before you begin the sales process. Prepare great financial reports, board materials, etc. Do your best to show sound management practices.

Due diligence is often an afterthought and is often used as an opportunity for the buyer to renegotiate terms and pricing. Whether it’s the quality of the information provided, finding buried risks, or, at its worst, finding misleading information, it’s important to be way ahead of the request. Don’t let due diligence discount your value, rather use it to enhance value in an open, honest relationship with your buyer.