In a very concrete way, the due diligence process consists of reviewing the company in its various aspects. To do so, lists of documents from the buyers’ lawyers, accountants and operators will be provided.
When the seller is ready and accompanied, everything moves forward more efficiently. This involves taking out, digitizing, and indexing the various documents. Don’t be surprised, we saw between 100 and 500+ documents required.
There are different platforms for document exchange. The burden of coordinating the exchange of documents usually falls to the sales team.
Once a good deal of information is shared, communication between teams begins.
Examples of questions include how sales are made, revenue recognized when and how, if there is a defect in a part or service – what happens. In short, the buyer seeks to understand the nature of the business, the role of the seller and to ensure that he has understood the risks of what he is buying.
During this period, when the buyer is relatively certain to buy, the financing will be triggered. I love to hear “it’s pre-approved”, in the commercial, it doesn’t really exist! Each transaction is unique, and financiers will usually review the price, structure, and terms and conditions that satisfy them based on the buyer and the offer in place.
Diligence includes a huge exchange of documentation, their analysis, and understanding of them and the business. Normally we can count on 2 months for this step when everything is perfect. Then you must get the funding. In short, a transaction that is done in less than 3 months after a letter of intent is very fast and almost out of the ordinary.