Vendor assistance: a flexible alternative to vendor due diligence with many benefits
The process of selling a business can be daunting, particularly the due diligence process. Traditionally, the buyer engages a third party to minutely assess the target business, typically covering financials, tax, commercial dynamics, IT, legal and HR. The due diligence process can be time-consuming and stressful for the seller. Vendor assistance gives the seller more control over the process. Addressing the key issues and concerns before marketing the business allows key management to continue focusing on running the business during this critical trading period.
Benefits of vendor assistance
The key difference between vendor assistance and vendor due diligence is that no reliance passes to the eventual buyer. A thorough review of the available financial information before going to market enables the sellers to identify and address key issues. This reduces the risk of surprises once the information memorandum has been issued to the buyer pool, therefore helping to protect value during the due diligence phase.
The scope of work is flexible and can be tailored to where business owners require additional support, either due to management bandwidth or existing financial constraints. Additionally, the vendor assistance provider can act as an extension to the team throughout the sale process including key negotiations.
A key output is the production of a financial data book (FDB). By conducting a thorough review, accurate financial information can be provided to the potential purchasers. This data can then be used by the buyer’s advisers during their due diligence, which often leads to a more efficient process.
We find that clients benefit from vendor assistance and FDBs where:
- the likely purchasers of their business are trade buyers.
- the available financial information is limited and needs enhancing to give the best chance of getting through the buyer’s due diligence process.
- the finance team has limited resource.
How we can assist
At Moore Kingston Smith Corporate Finance, we have the experience and expertise to help sellers prepare for the sale process. Taking a proactive approach and investing in thorough preparation will ultimately help maximise the sale price.
If you would like to discuss the benefits of vendor assistance, please contact Mike Orton.