2018 Fall issue of Horizons

Additionally, engaging in a sell-side due diligence process prior to marketing the company for sale significantly assists in speeding up the transaction process. Typically, sellers lose value in transactions the longer the process is drawn out. By preparing with sell-side diligence, the timetable can be dramatically sped up and as a result improves valuation outcomes. Benefits & Importance of Sell-Side Due Diligence Sell-side due diligence is helpful in providing insights as to what to expect from a buyer during the sales process, but more importantly, it helps to minimize surprises and maximize valuation. Addressing issues on the front-end of a transaction provides a smoother due diligence process on the back-end and can reduce potential deal-killing issues. According to research by Professor Hollis Ashbaugh-Skaife of UC-Davis Graduate School of Management , a higher rate of deal cancellation is associated with poor quality of financial reporting.

early in the sales process and addressed in a timely fashion. In addition, by identifying and supporting positive quality of earnings adjustments, sell-side due diligence may help support a higher sales price. While sell-side due diligence does not supplant the need for buy-side due diligence, it can help accelerate the process, which in turn can help retain value. Sell-side due diligence helps smooth the selling process and reduces the time required for buy-side due diligence. Perhaps more importantly, it allows experienced M&A professionals to provide guidance to the selling company’s management, who may be inexperienced with respect to M&A transactions. Equally as important, sell-side diligence can help identify and support positive adjustments to EBITDA and speed up the transaction process, all of which lead to higher valuations. With record high valuations and a significant amount of available capital for deals, conducting sell-side due diligence in advance of selling a company will help maximize transaction value and reduce the risk of a significant financial diligence deal-killer.

Through the deployment of sell-side due diligence, potential issues can be identified

PRIVATE EQUITY SERVICES GROUP

RubinBrown offers private equity firms and their portfolio companies an integrated suite of business services aligned across the entire private equity life cycle. For more information, visit www.RubinBrown.com/Private-Equity .

Jeff Sackman, CPA, CM&AA, CGMA Partner Private Equity Services Group 314.290.3406 jeff.sackman@rubinbrown.com

Ben Barnes, CPA, CGMA Partner-In-Charge Private Equity Services Group 314.678.3531 ben.barnes@rubinbrown.com

Tim Farquhar, CFA, CPA Partner Private Equity Services Group 314.290.3281 tim.farquhar@rubinbrown.com

Paul Moritz, CPA Business Advisory Consultant Private Equity Services Group 314.290.3291 paul.moritz@rubinbrown.com

The Emergence of Sell-Side Due Diligence

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