You can read the profile page of Andrew Barnett on Crunchbase or follow him on LinkedIn or Twitter or Yelp. Andrew is the founder and owner of AB Merger & Acquisition Consulting Firm in Fort Lauderdale, Florida. He uses his finance degree and other experience he got from dabbling with different industries while working on M&A projects. Andrew works in the interest of his clients while planning a merger, articulating a deal, instigating the merger, or executing due diligence.
Due diligence includes creating a letter of the intent draft and a non-disclosure defining the transactions’ key points. The letter of intent protects the involved parties’ interests specifying that the outcome of constrained investigations done was satisfactory and the seller did not mislead any information.
It is recommended that buyers need to perform due diligence even if the seller offers a legal guarantee. The contractual indemnities that the sellers provide are limited in terms of amount and time. They are not a replacement for effective due diligence performed by a buyer.
5 essential borders potential buyer needs to examine in M&A
- Legal due diligence – Potential buyer needs to ensure that the business operation follows the regulations, so examine the existing operating agreements and contracts with potential brands, licenses, and suppliers. A legal audit helps to confirm the ownership rights of the seller. If there are disputes filed or initiated, due diligence will reveal, which impacts the seller’s warranty or final price.
- Understand the operational characteristics – Get familiar with details about the IT system used, yield management strategy used, and professionalism. You can detect the areas that are weak and plan to improve them for gaining a competitive edge.
- Technical review of the building and equipment – Physical elements like the building structure, electric, plumbing, decorative elements, IT systems, etc. get examined to ensure that the building complies with all the health and safety standards.
- Finance & accounting – The buyer can conduct a tax & accounting audit to determine if there are any tax obligations. It helps to assess the financial consistency and the business is not in an unwarrantable financial state.
- Human resources & social aspects – Due diligence ensures that the labor law regulations are followed reviewing the employment contracts, employees list, salaries and granted staff benefits. It allows the potential buyer to evaluate if there is a need for restructuring or reorganizing.
Due diligence success is based on proper coordination of the consultant team, prepare a checklist, and meet deadlines!
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