WHAT'S IN BUY-SIDE DUE-DILIGENCE?
Every business is unique just as every merger or acquisition. The due diligence process unlocks access to corporate, governance, and other issues the buyer will need to deal with. Assuming the buyer finds interest in purchasing the target after reviewing the confidential information memorandum (CIM), the buy-side and sell-side advisors will begin coordinating presentations, site visits, and the preliminary due-diligence process.
The purpose of a buy-side due diligence process is to estimate the price and terms to propose to the seller. Unlike the sell-side process, the buy-side advisor comes into the due diligence process at a later stage. During the buy-side process, buy-side advisor utilizes information provided by the sell-side advisor and data found in the Confidential Information Memorandum (CIM).
A buy-side due-diligence tends to be expensive due to the stages of the diligence process and the professionals involved in the transaction (i.e. attorneys, accountants, etc…).
During the process buy-side advisors conduct valuation, financial modeling, and investigate information that may disturb the acquisition process. Some information advisors may seek to uncover is probably pending indictments or fraud red flags etc…The buyer may also interview customers, employees, vendors, and suppliers to confirm information provided by the seller.
Although both parties are trying to be as transparent as possible, the due-diligence process allows justification or price adjustment to ensure a successful and smooth transaction. A good buy-side advisor will extensively to safeguard a favorable result to the client and the other party.
Understanding to possible drawbacks may be a headache for the buyer, these issues may prevent future disruptions and unforeseen expenses. The goal of the buy-side advisor is to ensure the client maximizes opportunities to add-value and close the deals, while ensuring minimum disturbance post-merger.