Webinar Recap – The Transaction Journey: Preparing for and Excelling through Due Diligence

Introduction

On October 15, 2024, we hosted a dynamic session titled The Transaction Journey: Preparing for and Excelling through Due Diligence. The goal of this webinar was to shed light on the intricate steps involved in navigating due diligence, offering practical strategies for business owners planning to sell their companies. I was joined by two distinguished colleagues, Garth Leone, Director of Strategic Initiatives at IT Valuations, and Shelby Clark, Senior Project Manager of Transactions. Together, we walked attendees through the different stages of this critical process.

Here’s a recap of the main takeaways from the session:

The Importance of Early Preparation

Shelby opened with a crucial point: start preparing for due diligence long before you think you’ll need to. Whether you’re five years out or ready to sell next year, organizing key documents like customer contracts, financials, and employee agreements well in advance will reduce stress and ensure the process runs smoothly when it’s time. As Shelby said, “Starting early helps sellers avoid feeling like they’re juggling two full-time jobs.”

What to Expect: The Four Phases of Due Diligence

1. Financial Due Diligence: This stage is all about your company’s balance sheets, profit and loss statements, accounts receivable and payable, and any potential add-backs. Ensuring clarity and transparency in your financials is paramount. Garth stressed that you should avoid “lifestyle spending” through the business in the 12 months leading up to the transaction.

2. Legal Due Diligence: This stage involves reviewing contracts, legal agreements, and any past acquisitions. Shelby noted the importance of standardizing employee agreements and keeping vendor contracts up to date. These steps will ensure smoother negotiations and avoid complications with legacy documents.

3. Customer Due Diligence: One of the major points covered was how buyers often conduct customer satisfaction surveys as part of their diligence. Shelby shared a story about how a buyer saved several top clients by offering services the seller couldn’t. This phase also includes detailed customer revenue analysis, which is why tracking revenue by customer by service line by industry by month is so important.

4. Operational Due Diligence: Buyers will also look at your operational tools and processes, vendor dependencies, and any risks that could impact business continuity. Garth emphasized the need for well-organized systems and a trained team to manage operational due diligence efficiently.

The Emotional Journey

Beyond the data and documents, selling a business is an emotional process. Garth shared his own experience, explaining how it’s easy to feel overwhelmed or fatigued during due diligence. He reminded attendees to stay focused on the “why” behind the transaction—whether it’s retiring, starting a new venture, or simply moving on.

Closing Thoughts

Due diligence is complex, but with the right preparation, it can be a seamless part of the transaction journey. Shelby’s advice to owners was clear: “There’s always a way to make things work if everyone is aligned toward the same goal.”

If you missed the webinar or want a deeper dive into due diligence preparation, feel free to reach out to our team. You can also save the date for our next session on Navigating and Understanding the Letter of Intent on November 20th.