The COVID pandemic and its wide-ranging effects have become very tiresome for most of us and “normal” doesn’t appear to be returning soon. Perhaps your business has reached a stage where it would be a good time to sell, or perhaps retirement is on your mind.
If COVID pushed those thoughts to the back of your mind, now is the time to reconsider. Deals are happening, and good businesses are in demand; in fact, some companies that are doing well in spite of COVID are seeing premium valuations. However, the pandemic is causing buyers to be more stringent in their due diligence. Preparing a business for a potential sale takes time, so starting those efforts now will ensure that everything is in order for a seamless transaction in 2021.
2021 Business Sale Due Diligence Checklist
DGP Capital has compiled a list of topics to review as you consider making 2021 the year in which you monetize the business that you have built. Review this due-diligence checklist to prepare your company for a potential transaction / exit:
BUSINESS OPERATIONS / CORPORATE DOCUMENTS:
- Ownership information – stocks/shares
- By-laws and formation documents
- Business plan
- Chart of company structure and staff
- Job/Position descriptions
- Employee census – noting key personnel, contracts and compensation
- HR department overview – policies, turn-over rates, hiring practices
- Subcontractors and outsourced professional services, consultants, freelancers, distributors
- List of suppliers/vendors and any purchase agreements
- An accurate inventory history
- List and explanation of products and services
- Summary description of production lines and/or white-labels
- Procedure and process documentation
- Customer lists and policies
- Sales and marketing strategies and past campaigns
- Detailed sales data, including sales by geography, customer, product lines
FINANCIALS:
- Complete financial statements for the last 3-5 years- balance sheets, income statements, P&L, receivables, payables
- Any third-party accounting audit or review reports
- Physical asset list
- List of liens / detail of debts b mortgage, lease, revolving, secured, unsecured, bonds
- Tax returns for three years
- Summary of production costs and margins
- Annual company reports going back 3+ years
LEGAL / CONTRACTS
- Franchise agreements
- Distribution contracts
- On-going or potential litigation
- Exposure to hazardous material liabilities
- Insurance policies
- Licenses and Permits
- Details of Intellectual Property, trademarks, and patents
- Government agency compliance records
TRANSACTION ADVISORS:
- Accountant – experienced in assembling and professionally presenting financial records for sale transactions, and knowledgeable in tax rules governing ownership transfers
- Attorney – experienced in reviewing existing contracts and policies, preparing NDA’s and seller disclosure statements and sale agreements
- Appraiser – if needed, to resolve uncertainty in particular asset valuations
- M&A Advisor – manages your entire transaction process, including identifying and screening qualified buyers while maintaining confidentiality, allowing your focus to remain on business operations.
For those of you who prefer a portable version, we’ve included all of the 35 topics above on the following one-page PDF (which you can download here) .
Leverage Experts to Capitalize on Your Expertise
You have spent a lot of time and effort in developing and managing your business. This makes you an expert regarding your business. This experience however, does not produce the expertise needed to prepare it for sale, to properly value your business, or to manage its sale, from marketing all the way to close.
DGP Capital is experienced in this process and invites you to contact us to explore how we can assist you in reaching your goals. Specialists and professionals can advise, assist and guide you through this process to maximize the value you receive for your business. DGP Capital has navigated these M&A waters before and would be pleased to assist you now or to include you in our regular emails which share our insights and expertise on these matters.