A private equity deal would not be complete without a thorough due diligence procedure. This is the most important step to identifying areas of value-generating operations improvements prior to investing into an enterprise.
This process typically starts with an confidential information memorandum (CIM) – a document that contains financial information, a description of the management team, and details about the commercial aspects including insights into the company’s customers and its products. The most successful private equity firms add to the CIM by asking questions that are more specific, and using an electronic data room to gather documents from the company’s management team.
Legal due diligence is a crucial step, especially when it is related to buyouts. The business plan for a buyout often involves cutting down on staff and selling assets, as well as closing offices or facilities which could inadvertently create legal issues.
In this era of soaring multiples of purchase, it’s more important than ever to conduct thorough market and commercial due diligence. A thorough approach to the due diligence process will help private equity firms to develop a scalable day-one growth strategy and create more value than they thought possible.
To learn more about Baker Tilly’s capabilities to help you in your due diligence, get in touch with our team. We’re here to help get the most out of your next transaction. Image credit: Credit to Getty Images.