As a business buyer, you understand the importance of due diligence.
But unless you have experience with due diligence, making sure you've covered all your bases can be a challenge. The last thing you need is to own a company that hasn't been thoroughly vetted for hidden weaknesses and liabilities.
The unfortunate thing is that many business buyers plunge headfirst into due diligence with the assumption that they'll pick it up as they go along. While it's true that some aspects of due diligence are common sense, others aren't–and the less obvious aspects of due diligence are the ones that can threaten the operation's viability down the road.
The best way to ensure that due diligence has been conducted properly is to seek outside assistance from business acquisition professionals. Due diligence consultants are experts at helping buyers identify critical characteristics of a potential business purchase. With that in mind, here's why we recommend using a due diligence consultant when buying a company.
- Expertise. The average business buyer simply doesn't have the expertise to conduct a thorough due diligence process. Due diligence consultants know what to look for and can quickly identify problem areas that most buyers miss.
- Objectivity. Buying a business can be a lot like buying a house. If you're not careful, it's easy to fall in love before the deal is finalized. Due diligence consultants inject objectivity into the buying process and shed light on issues that you might be otherwise inclined to overlook.
- Focus. If you already own a business, hiring a due diligence consultant enables you to continue to focus on your company during the process of buying a new one. A due diligence consultant is free to give his entire focus to the acquisition.
- Expedience. Due diligence consultants are almost always capable of conducting due diligence faster than you. Since an extended acquisition can irritate sellers and result in significant opportunity costs, due diligence consultants can be can be a necessary resource for making the most of the process.
- Credibility. Issues that arise during the diligence are often leveraged to negotiate the price downward. When that happens, a due diligence consultant automatically has more credibility with sellers then a buyer. Of course, there are no guarantees – but it's likely that the money you spend on a due diligence consultant can be earned back during final negotiations.