How to save thousands on lawyers and accountants by getting your business ready to sell with Due

Overview

Due’s client (the "Company") is a civil construction service provider operating in Western Australia. The Company’s owners/shareholders (the "Vendors") wanted to retire so they engaged a business broker, Benchmark Business Sales & Valuations, to sell the Company. The Vendors did not want to incur legal fees as the Company’s valuation was low, so the Company’s lawyer recommended selling the business using due diligence software, Due, saving the Vendors thousands.

The Challenge

After interested buyers confirmed their interest and signed a confidentiality agreement, the Vendors needed a way to share confidential information (e.g. financial statements, and key customer contracts) with interested buyers and their advisors, track engagement levels and respond to the buyer’s questions.

The Vendors hadn’t sold a business before, so they encountered the following challenges:

• No access to a due diligence tool or fit for purpose file sharing tool (they didn’t want to use a generic file sharing tool as they were sharing confidential and commercially sensitive information)
• Unsure about what information the buyers would request and whether they would have this information readily available
• Unsure how to present the information in a professional manner that was easy for the buyer to find what they are looking for

Our Approach

The Company used Due to help sell their business as it was recommended by their lawyer based on the challenges they described (as set out above). The solution we implemented helped the Vendors:

• Know what information to share with buyers, and at what stage (e.g. before or after a LOI is signed);
• Have a way to organise and share confidential information with interested buyers so it was organized in the correct folders and answered specific questions the buyer would ask; and
• By conducting an initial review of the Company’s documents, identify any issues that needed to be fixed before the buyer started their due diligence such as:
  • Expired contracts with key customers
  • Undocumented or informal arrangements with key suppliers
  • No employment contracts with key personnel
  • Undocumented property lease with the Company’s shareholders and an up-to-date property valuation to confirm the lease was on commercial, arm’s length terms
  • Undocumented shareholder loans
• Understand how the Company could fix the issues identified such as what information a buyer would expect to understand even without a contract in place (in the case of a property lease, key lease terms such as annual rent, if and how rent would be reviewed)
• Convert recommendations on how to fix issues identified to tasks and assign tasks to project team members to complete

The Results

By proactively fixing these issues before the buyer discovers them, the Vendors avoided protracted due diligence and saved thousands on legal fees fixing issues before the buyers discovered them.

“We engaged Due to prepare a secure data room to sell our business, and the results exceeded our expectations. Having all our documents in one central, well-organised location has made the process far more efficient and professional. The platform allowed potential buyers to easily review the information they needed, while giving us complete control over who had access to specific documents. The ability to track activity and maintain transparency throughout the process has been invaluable. This solution has given us confidence and peace of mind as we move through the sale of our business, and we would highly recommend Due to any business preparing for a transaction.”

Next Steps

If you are a business owner or a business broker selling a business under $50M, we would be delighted to hear from you to discuss how we can assist you save time and money selling a business.