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Small company due diligence - are you considering expanding your business?

The SME businesses which feel that they will weather the ill effects of the recession, are beginning to consider long term strategies for growing their businesses. With struggling competitors, suppliers and even customers, growth by acquisition currently offers a serious prospect of rapid expansion at attractive valuations.

A cost effective due diligence service can add value to almost any transaction. There is little point in an SME undertaking a ‘full-blown’ due diligence exercise - which for bigger deals will cover not only financials, but specific work on operations, staff, pensions, properties, legals and many other issues. However a limited scope due diligence should provide the buyer with comfort in making their decision, and also a sound basis upon which to negotiate the price or other key terms. 

In the current financial environment, there are many examples of poor due diligence (when the economy is booming, due diligence failures will be less apparent). Failing to spot problems prior to signing the deal can have a devastating effect on the ability of a business to service its debt and ultimately survive. Don’t find out too late…

 

 

Date: 29th May, 2009
Author: Julian Dobbin

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