Common Mistakes When Exiting A Business – Not Prepared for Due Diligence

Posted on November 26, 2013 · Posted in Blog

Many business owners think that once an offer is received and accepted the business is as good as sold.  However, in most cases this is not the case. The acceptance of an offer is not the finish line but only the start of an often challenging and difficult due diligence process.

All deals will undergo a thorough due diligence process by the buyer and will certainly be a requirement of all lenders and investors.  Entrepreneurs must understand that any false, withheld or inaccurate information will be brought to light (intentional or not) through the due diligence process.   Once that happens and depending on its significance and impact on value, the result can range from a deal unprepared for due diligence mistakes when exiting a businesscompletely falling through to a significant price adjustment.

While covering up the problems associated with the business may be tempting, these actions can become the basis for discounted terms or worse yet, legal action after the sale.  No business is perfect, but how these problems are disclosed can make a big difference in their impact.

Be sure to reveal all relevant facts to any professional representatives you are working with. They can help determine how to properly disclose and manage their potential impact.

There are very few factors in a successful transaction that are more important than confidence and trust.   Anything that misrepresents or potentially violates this trust can be the ultimate deal breaker and value killer.

Entrepreneurs must understand that any successful transaction will include getting through an often excruciating due diligence process.  We have included a link to many common due diligence requests below.