Seller Due diligence should be the exit strategy of any business. Even if the business is in loss; it doesn’t mean that you close down the doors forever. It may be loss for you but may be a win-win situation for someone else.
There are several steps from a seller’s perspective on seller due diligence. We have experienced several factors. Here are some of our helpful tips.
What Documents to Show the Buyer?
Seller must have good document management system in place to show documents on time. It helps close the deal faster. It is helpful to gather all the documents and submit it to the seller’s team for their review.
- Customer agreements
- Supply agreements
- Credit or loan agreements
- Real property or equipment leases
- Shareholders agreements
- Employment agreements for key employees
- Collective agreements (if unionized)
- Government licenses/permits and authorizations that are necessary to run the business and
- Any other agreements that create current or contingent rights or obligations for the company.
Intellectual Property (IP)
This covers any material that the company has produced.
- Logos
- Trademarks
- Copyrights
- Patents
- Technical Papers
- Manuals
- Documentation
- Business Secrets
Human Resources (HR)
No one likes to get fired or laid off. Seller must ask the buyer about HR policy.
- Is the buyer going to keep the same HR or change completely?
- Staff member and management is important to buyer.
- If HR is going to change, what will be their payout and compensation?
- Is buyer following the employment law?
- Is union involved?
Real Estate Property
- As a seller, do you need to sell the property or just the business rights? These are two different things.
- If the property is registered on tax documents, then it may be a part of the sale.
- Are you leasing?
- Do you have complete documentation of leasing?
- Who owns the lease?
- What consent does the landlord has?
Licenses
As a seller, you need to expose what kind of licenses and permits you have to operate.
- Can a buyer assume to have these permits?
- Is buyer technically qualified to handle the permits?
- Seller must ask for qualification to handle permits.
Disputes & Litigations
- As a seller, are you in any kind of disputes or litigation?
- What threats are out there for the buyer?
- Is there any pending disputes or litigation for the buyer?
- Consult lawyers on how to disclose any disputes and litigations.
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