In Deal Note® 65, we explained that Sale Preparation includes due diligence that takes place during the preparation of selling a middle-market aerospace and defense business. In Deal Note® 112, we discussed the importance of navigating buyer due diligence intelligently. In this Deal Note®, we cover the key difference between those two vital due diligence stages.
At the beginning of a sale process, a seller’s deal team (typically: legal counsel, accountant, banker, and any other specific professionals) will ask a lot of questions of the selling management team and request a lot of documentation.
Buyer due diligence is almost identical: a potential buyer’s deal team (typically: legal counsel, accountant, banker, and any other specific professionals) will ask a lot of questions of the selling management team and request a lot of documentation.
However, the time for a seller to make mistakes or answer “I don’t know” is during the sale preparation work. The main difference between the two due diligence processes is that when major issues arise during buyer due diligence, the sale price may be discounted, or the buyer may walk away. When issues arise in sale preparation due diligence, the deal team will work to resolve the issue together or correctly disclose the issue in the marketing materials.
Complete disclosure to the sell-side deal team during sale preparation due diligence is critical to avoid unknowns being discovered and negatively impacting the sale during buyer due diligence.
Have a great day,
Ryan Kirby
Junior Partner
