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Maximize your exit strategy: Mitigate surprises, accelerate closing
Preparation is key to a strong and successful private equity exit
Whether selling your business or going public, a successful business exit from your existing portfolio is a complex process. Preparing for this important step begins with answering some critical questions.
Readiness questions to consider include:
Optimizing the above issues will position you in a more successful exit mode. To get ready for exiting, many private equity firms are increasingly seeing the benefit of using a sell-side due diligence strategy. While due diligence has traditionally been relegated to buyers, sellers are seeing the benefits of being better prepared as they enter the sales process. The primary benefit of conducting sell-side due diligence is it facilitates a more efficient transaction and allows the seller to be equipped for conversations with buyers about the company’s financial and tax matters.
By conducting sell-side due diligence, sellers gain a better understanding of the company’s strengths and weaknesses and are able to present financial information to buyers with confidence. Conversely, without conducting sell-side due diligence, sellers often aren’t prepared for the rigors of buyer due diligence. Sellers do not naturally anticipate buyer concerns, and they aren’t prepared to answer the hard questions buyers will undoubtedly ask during the process. The information gleaned from the process gives the seller the ability to create a dialogue with the potential buyers on key points that should be highlighted and adopt a head-on approach for any conversations about potential weaknesses the company may have.
After conducting sell-side due diligence, sellers should have comfort that buyers will not uncover any surprises in the financial information that could give a buyer leverage. Through the sell-side due diligence, buyers will receive an objective view of the company’s financial information, so the best offer can be made without the risk of a broken deal. Benefits include:
- Improves speed to closing
- Allows the seller to understand and proactively address the potential concerns a buyer may have
- Allows management to spend more time focused on the business during the sale process
- Reduces the risk of the deal being renegotiated due to a buyer’s financial diligence findings
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