Hitting revenue and profit projections during due diligence is key
Ask a business broker or investment banker what top headaches can arise during due diligence and they will tell you….if the seller starts missing their revenue and profit projections while the acquirer’s due diligence process is underway, a can of worms will get opened.
Put the glasses of the acquirer on. They receive your financials and a management presentation of some sort that together excite them to make an offer. But during the due diligence process, they ask for current financials for the most recent month and performance shows a miss to your budget or projections you’ve given them. And if this occurs over multiple months of a potential due diligence process, the acquirer has to now question whether they are buying your business with a new, negative trend beginning. This adds time and questions to their due diligence process and brings more stress to the seller as they try to explain the miss.
It's best to only plan for your exit process to occur when you are highly confident that positive performance will continue during the acquirer’s due diligence process. Prior to starting the sale process, sit with your team (sales and finance) and do your best forecasting to either give yourself the confidence that timing to sell could be good as performance is highly likely to continue or if not, modify the timing of your exit. Don’t let your future euphoric exit be negatively affected at the last minute by this issue. Add this preparation step to your effective exit planning, or as we call it, exit optimization.
