Some interesting commentary on the M&A sale process in the latest Mergermarket publication “M&A Preparedness: How to plan for your next transaction”.  Please use the link to access a copy of the Report.

While the report is based on a survey of respondents based in North America, the same key findings and conclusions apply to Australian M&A transactions.  A couple of the key findings in the report include:

• When looking back on previous deals:
• 87% of respondents said they would they would have organised the company for a sale well in advance of the process beginning; and
• 57% of respondents would have retained outside counsel earlier in the process.

• Respondents noted that the greatest logistical challenge for sell-side preparation was readying the necessary legal, financial and technical paperwork. One respondent noted that “The absence of paperwork, records of meetings, or unsigned documents by necessary parties is a threat that will ultimately reduce the value of the seller. Buyer due diligence is concentrated mostly on concrete data and paperwork for previous transactions and references. Handling these is especially difficult if the sell-side is not organized.”

The key findings in the report support our previous recommendations that if you are proposing to sell your business, proper planning and preparation before entering into any discussions with potential buyer(s) will assist you in obtaining the best possible price for your business, limit delays and reduce exposure to risks. 

It is important to get everything in order before entering into discussions with a potential buyer to determine whether there are any gaps or errors in the information (or documentation which can be corrected before due diligence commences).  If you are able to give a potential buyer correct and up-to-date due diligence documents, this is likely to help give the potential buyer comfort, enhance value and lessen the severity of warranties and indemnities that may need to be agreed with the ultimate buyer.  Missing documents (or gaps in information) can have the reverse effect. 

 Such preparation can include a seller undertaking their own due diligence by considering and collating the documents/information that a potential buyer will want to see when conducting its due diligence.  Please see our articles 'Top 7 legal tips when selling a business' and 'Tips and traps for selling your business' for further commentary on seller due diligence and other tips if you are proposing to sell your business.

Please get in touch with one of the Sierra Legal team if you need any assistance with due diligence or the sale of your business.  We also have a template checklist of documents that a potential buyer is likely to want to review during due diligence that can assist you with the process.  Please contact us to obtain a copy.