Buyers and sellers need to be clear and thorough during the due diligence process, advise experts at a panel at the Alliance of Merger & Acquisitions Advisors (AM&AA) Summer Conference, held at the JW Marriott in Chicago from July 22 to July 24.
Panelists on the topic include: Matt Kauser, senior managing consultant at BDK LLP; Christopher Hart, vice president at LH Capital and Sid Shaver, managing director of Statesman Corporate Finance offer tips for conducting financial due diligence at AM&AA’s Summer Conference at the J. W. Marriott in Chicago.
Here are 7 of their tips:
1. Be open about potential problems with the deal
2. Have detailed support for add-backs, as fewer add-backs can sometimes improve valuation
3. Remember that available leverage and lender pricing are not based on free cash flow alone, but that cash flow is an important factor
4. Be sure to vet managers, especially if a geographic expansion process is going on at the same time as the due diligence
5. Sellers should prepare in advance for the process and be aware of what due diligence entails
6. Advisers should have a preliminary due diligence conversation with the seller about valuations to give them an idea of what private equity firms or strategic buyers may be willing to pay
7. Provide accurate and timely responses
AM&AA expects up to 550 dealmakers to attend the annual conference, including private equity investors, investment bankers, lawyers, accountants and other deal professionals. The organization was founded in 1998, and is made up of certified public accountants, attorneys and other corporate financial advisers. Members are generally focused on buying and selling businesses in deals valued between $5 million and $500 million. For more, see “Lower Middle-Market Dealmakers Flock to Chicago for AM&AA Summer Conference.”