Do I need to commission vendor due diligence?

When a company is up for sale – or selling off one of its parts – vendor due diligence (“VDD”) is a valuable tool to provide an in depth and credible report on its health to potential purchasers. VDD provides comfort to both purchasers and vendors with an independent view on the business’s historical performance and likely prospects.

VDD is commissioned by the vendor early on in the sales process, with the report being made available to shortlisted bidders and being relied upon by the eventual acquirer. VDD provides vendors with greater control over the sales process and timing of sale which can, in turn, help to secure a higher price for the business.

VDD aims to address all the concerns and issues that may be relevant to even the most demanding purchaser. Key benefits to vendors of the VDD process include:

• reduced disruption as the sales process is more controlled and better aligned to management’s resource constraints;
• added credibility to the facts, figures and information within any sales information provided to bidders, thus reducing the scope for “price chips” later in the process;
• allows protection of certain commercially sensitive information for the initial part of the process;
• early identification of critical issues allowing the opportunity to regroup and fix outside the glare of publicity;
• rapid execution of the divestment from its announcement reducing business disruption and speculation.

Key benefits to purchasers:

• greater certainty over the nature of the target business and the characteristics of its cash flow, helping pricing decisions and providing early visibility over the level of gearing the structure will support;
• reduced uncertainty for financial buyers potentially allowing them to justify higher offers;
• removes the necessity for bidders to undertake their own due diligence work as they will be able to rely on the VDD report.

Contact details
Email: Russell Wilson
Tel: +44 (0)1908 353245