There is a question every shareholder asks at some point: if I already have an interested buyer, why do I need an advisor? The answer lies in what happens between the letter of intent and closing.
Due diligence is not performed; it is managed
The advisor does not perform due diligence; the buyer's auditors, lawyers and technical experts do. What the advisor does is manage it: decide what information is delivered, in what order and with what context; anticipate findings before the buyer discovers them; and turn every finding into a discussion about facts rather than a discussion about price.
That is where a ten-million letter of intent closes at ten or at eight. A finding without context is a discount. The same finding, anticipated, quantified and with a mitigation plan, is a footnote.
The effect on warranties
Preparation and process management also show up in the purchase agreement. A company that arrives at due diligence in order negotiates fewer specific indemnities, a smaller escrow and shorter survival periods for its representations and warranties. Each of those points is money the seller keeps instead of leaving in security.
Controlling the process is not a matter of formality. It is the difference between negotiating from the facts you prepared and negotiating from the findings the buyer discovered.
Andrés Proaño · Managing partner, Axioo Financial Consulting