Four Surprising Benefits That Sell-Side Diligence Can Uncover During the Divestiture Process

How much do you really know about the Company that you will be bringing to market? Have you thought of all the risks a potential buyer may find?

Sell-side diligence not only provides benefits which diligence providers have preached numerous times, but can uncover several surprising advantages that will help you prepare for the divestiture.

  • First, sell-side diligence sets up a framework for sellers, management, and the investment bankers to use throughout the divestiture process. By having a solid framework, the buyer sees more credibility in the financial statements and in management, which results in all other information provided by management to appear more credible. Sell-side diligence not only provides benefits which diligence providers have preached numerous times, but can uncover several surprising advantages that will help you prepare for the divestiture.
  • Second, sell-side diligence identifies and addresses issues you or management may not have considered by looking through a buyer’s lens. We found that management provided much more candid responses during sell-side diligence than buy-side diligence, which can only prepare a Company that much more when going to market. 
  • Third, sell-side diligence provides an independent perspective on the Company. Whether management ran the business from a sales perspective rather than a financial perspective, or simply never prepared detailed analysis on its results, sell-side diligence can uncover value that directly impacts the valuation and modeling of the company on all three sets of financial statements. 
  • Fourth, the buyer and investment bankers surprisingly place heavy reliance on the sell-side diligence report. The buyer has fewer questions to ask and a solid base for their projections and the investment bankers rely on the financial numbers in the diligence report for their modeling.

All in all, sell-side diligence results in shortened transaction time, an increased likelihood of deal completion, and enhanced transaction. However, these unadvertised benefits of sell-side due diligence are key drivers in closing the deal.

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