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Using sell-side due diligence to maximize deal value

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The mergers and acquisitions (M&A) market has been very active for middle-market companies, and 2015 may prove to be another hot year, as sellers and private equity investors continue to be buoyed by a resilient U.S. stock market, plenty of cash on hand and low borrowing rates. However, to maximize returns from this competitive deal marketplace, an increasing number of companies are investing in sell-side due diligence, which can help them gain a significant edge in any transaction.

There are distinct advantages to sell-side due diligence:

  • Verifying the accuracy of financial information
  • Identifying adjustments that positively impact EBITDA
  • Uncovering issues to avoid deal-killing surprises
  • Navigating internal change
  • Allowing business leaders to stay focused on goals

The tax ramifications of any prospective M&A deal are a significant issue for buyers and sellers. By using sell-side due diligence, a business owner or private equity firm can identify any significant tax issues early in the process and frame those concerns in the best possible light.

It is possible to be too close to the day-to-day operations of a company and potentially miss warning signs or other concerns that could cause a red flag to be raised by a prospective buyer. Reductions in purchase price or deal failures are common if any irregularities are discovered or any issues are inadequately addressed. Sell-side due diligence helps to anticipate buyer concerns and satisfy expectations and is a valuable tool for helping to ensure the transaction is advantageous for both the buyer and seller.  

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