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Due Diligence
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Due diligence, together with accurate business appraisal comprise the critical core of every successful sales transaction. Without a competent and thorough investigation of all aspects of the business the buyer risks loosing all or part of their investment. In addition to the financial history of the business the investigation must cover cashflow, future earnings potential, working capital requirements, employees and management, marketing, customer relationships, supplier agreements, sales strategies, licenses, insurance issues and a host of other areas based on client needs. Florida Business Advisors offers three levels of due diligence designed to meet the needs of most individual buyers. In addition we offer corporate buyers specialized due diligence packages. 
- What is Due Diligence?
Due diligence is a systematic examination of the financials, tax returns and bank statements to verify the authenticity of the numbers you have received. Fundamental to this is proving the owner benefit, EBITDA or other income calculation that you have been given. Once the financials have been reviewed and approved, the equally important employee, management, organizational, marketing, sales, operations and distribution issues must be addressed. This is a time consuming process that requires significant skill and a structured approach. Not only must source documents be reviewed, but reports must be compiled and recast. In addition the owner must be interviewed, the premises inspected and as much information gathered as possible about every aspect of the business. The due diligence may also involve secondary information sources in order to analyze its markets, competition and other variables. If a commercial or SBA loan is involved, specialized reports such as AR and AP Aging, certified interim financials and other reports may be required that are outside the Buyer's scope of expertise. Due diligence typically is done within a 15 - 30 business day time period after the execution of a sales agreement. In certain situations, a preliminary due diligence may be performed prior to the sales agreement to determine if the business justifies writing a sales contract or not. The due diligence process is often one of the most difficult times for the seller if they are not prepared, and can be a unnerving time for the buyer as they wait for results of the investigation.
- Why Should I Have a Due Diligence Performed?
Without the proper due diligence you have little idea of what you are really buying. The financial performance of the business is the underpinning of the entire deal; that is the business must generate the income it represents itself as generating. After that, you must ascertain if the business has the ability and resources to grow in order to meet both short and long-term goals. If the due diligence is successful, the results will correlate closely with whatever information you were given by the owner and their assistants. If it is not successful, it typically signals a re-negotiation or a walk-away. In any case, you must conduct a due diligence in order to make the decision to move forward, or pause in the sales process. Taking a hasty or unprofessional approach to due diligence can cost you all or part of your investment, therefore the process and methodology used are critically important.
- DD I - Due Diligence I - Pre-Contract Examination
Approach: The Due Diligence I is performed prior to writing a sales agreement and must be approved by the seller. The approach is top line; that is each critical area is covered from current and recent historical information including financial, employee, customer, marketing, licensing, operational and other issues in summary form. We work from both primary documents and interviews with the owner and their accountant as necessary. Typically this includes a BA I or BA II business appraisal, verification of owner benefit for the last fiscal year and summary analyses of all major business components. Report: Upon conclusion we issue the appraisal reports and analyses in bound format and hold an in-person conference with you to review the results and recommendations. Turnaround: 10 business days. What we need: Most recent fiscal year tax return, profit and loss, balance sheet, interim profit and loss, and marketing materials. We also need all the information that the busines broker, accountant or seller has given to you. We then develop a specialized list of additional items that are needed.
- DD II - Due Diligence II - Post-Contract Examination
Approach: The Due Diligence II is performed after writing a sales agreement and functions as a contingency; that is the results must be acceptable to the buyer or the sales agreement is null and void. As such the due diligence must be performed within the specific timeframes outlined and agreed upon in the contract. The approach is in-depth; that is each critical area is covered from current and 3 years of historical information including financial, employee, customer, marketing, licensing, operational and other areas. We work from primary documents, interviews with the owner and their accountant as well as key employees and other business relationships as authorized by the owner and their consultants. Typically this includes a BA II business appraisal, verification of owner benefit for the last three years and detailed analyses of all major business components. Additional special reports may include a working capital analysis and monthly cash flow analysis. Report: Upon conclusion we issue the appraisal reports and analyses in bound format and hold an in-person conference with you to review the results and recommendations. Turnaround: 20 business days. What we need: Last three years of tax returns, profit and loss and balance sheets, as well as interim financials and marketing materials. We also need all the information that the brokers or other advisors have given to you. We then develop a specialized list of additional items that are needed.
- DD III - Due Diligence III - CPA & Attorney Examination
Approach: The Due Diligence III is identical to the Due Diligence II with the added reviews of our network of CPA's and attorneys. The CPA will typically do a review of all financials as well as tax and employment filings. The attorney will focus on the legal issues and potential pitfalls associated with the business. Report: Upon conclusion, FBA will issue its valuation and reports and the CPA and attorney will issue separate reports. FBA will hold a combined conference with you, the CPA and attorney to review the results and recommendations. Turnaround: 20 business days plus the additional time required by the CPA and attorney, if any. What we need: Same requirements as DD II with the added lists from the CPA and attorney.
- Special Packages
For corporate buyers we assemble a team similar to the DD III and develop a customized plan to analyze the company, the industry and the competition. Typically these projects take from 2 - 3 months to complete and are performed on retainer.
- Pricing
Our pricing structure is both competitive and affordable. This means that buyers of small entities as well as larger companies can afford the counsel they need to conduct an intelligent and thorough due diligence.
- Turnaround
If we have full cooperation from all parties we can usually perform the due diligence within the timetables above. If you are considering a due diligence, call us early on to schedule a time as there are many logistical and informational concerns associated with assembling the data and coordinating with the parties.
- Working with Business Brokers and Intermediaries
Since we routinely work with many brokers and intermediaries across the state, we can interface effectively with their agents in the due diligence process. This affords you a speedier response to requests and helps work through difficult issues and potential re-negotiations; an added value service that only Florida Business Advisors provides. We approach each due diligence on behalf of the buyer while forging a win-win approach in the event the buyer wishes to move forward, and the business possesses fundamental integrity.
- Our Turnkey Approach
Florida Business Advisors offers you a professional turnkey approach to due diligence and provides you with the information and recommendations to make competent decisions. From information gathering, to analysis, to interviews and the final counseling session, we work in partnership with you to achieve your goals.
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| Newsflash |
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Florida Business Advisors has more than 100 years of combined business expertise and $300,000,000 in sales transactions from its business consultants. We specialize in the sale of profitable businesses from numerous sectors including financial, service, manufacturing, contracting, distribution, technology, medical, retail and professional. We have helped business owners and corporations from $300,000 in annual revenue to $1 billion in achieving their goals. |
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Contacts
11345 53rd Street North
Clearwater FL 33760
Office: 727-712-1222
Fax: 727-581-9569
Email: info@floridabusinessadvisors.com
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Due Diligence 
