Roughly half of all M&A deals that enter the formal due diligence process never reach a final transaction.
Though numerous factors can kill a deal, the seller’s ability to effectively drive the process forward is vital to success. The buyer’s requests must be met with timely, truthful, well-organized information. Communication to the buyer must be punctual and consistent. Anything less can harm the seller’s credibility and weaken the buyer’s confidence in the business.
Leading an exit is a rigorous process comparable to a second full-time job for a portfolio company management team. How well the team managed, organized and tracked the business during regular operations dictates exactly how grueling the journey will be. PE-backed CFOs who consistently drive high levels of organization, documentation and discipline enter the process more “data room ready” than their counterparts.
Above is a sample due diligence checklist a buyer may provide to a seller. Consider it a reference point for the approximate depth/breadth associated with the exit process. A seller’s ability to quickly meet such requests (and field inevitable follow-ups from the buyer) can have a meaningful impact on the likelihood of a successful exit as well as the exact valuation.