Due Diligence in Business Acquisition – Part 3: Business Management Due Diligence

Just as a test drive and an inspection of the vehicle documents are part of buying a car, due diligence is necessary when purchasing a company. This is what the thorough examination of a company for sale by the potential buyer is called. In the last post of this series, we will cover Business Due Diligence.

The Business Due Diligence

In addition to legal and financial due diligence, business due diligence forms the last subsection. It is performed to better assess the value of the company and thus supports the contract negotiations during the company purchase. The company to be acquired and its positioning in the market are thoroughly examined. This involves a market analysis: product and pricing policies, customer and supplier relations, technologies, competitive situation, and the business model all require thorough analysis.

The scope of the business due diligence can vary. While in a family-internal succession solution or a management buy-out, the acquirer is usually well familiar with the business processes, a thorough Business Due Diligence is essential when selling to a third party. Generally, it can be said that the larger a company is, the more important it is. The seller usually provides informational material, but one should not rely solely on this and should form their own opinion, as not everything is always disclosed by the seller. Also here, due to the potentially complex nature of the material, the involvement of an expert is advisable.

Findea is happy to assist you in conducting a due diligence.

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