April 2024 – Step Two

Step 2 in Preparing Your Company for a Successful Sale

Do you know what to expect when starting the due diligence process with a potential acquisition partner? Most business owners don’t, and the process can be overwhelming for those who are unprepared.

Since the vast majority of owners are going through the process for the first time, this is completely understandable. It’s a big decision to explore the transaction process and you want to make sure you do it the right way.

The good news is due diligence doesn’t have to be so overwhelming. The right acquisition partner will view the diligence process as a way to get to know you and your business in a collaborative way. It should be a two-way discussion, rather than sending your information into the void and waiting for an answer.

While every process is unique, some diligence materials are fairly standard. Preparing these materials in advance can help expedite the transaction process when the time comes, while also presenting your company as well-organized and professional.

Here is a standard list of materials that potential acquisition partners will likely request during initial due diligence:
| Monthly financial statements in excel for 3 prior years and current YTD 
(Jan 2020 - YTD 2024)
+ Income statement
+ Balance sheet
***If you use Quickbooks, you should be able to quickly generate these reports by going to the P&L or Balance Sheet Report, changing the “reporting period” to months, setting the start/stop date, and then selecting “export to excel/CSV”
| List in excel of all projects completed for 3 prior years and current YTD (Jan 2020 - YTD 2024), including as many of the below items that are easily accessible:
+ Date project began
+ Date project was completed
+ Revenue/total invoice
+ Project cost 
+ Location (i.e. which office handled the project if you have multiple offices)
+ Service type (e.g. mitigation, reconstruction, catastrophic storm, etc) 
+ Project type (e.g. fire, water, etc.)
+ Customer type (e.g. residential, commercial, multi-family)
+ Referral source type for each project
(e.g. insurance company, plumber, online, etc.)
+ Actual referral source
(e.g. specific plumbing company, property manager, etc.)
***If you use management software to track jobs (like Dash), you should be able to quickly export this data from the system and select as many of the fields above as are available in your system. Most businesses don’t have easily available data for all of the above fields. The aim of the above list is to provide many of the possible data fields that an acquisition partner might want to see for each job, but is not an expectation that all of the above data is available.
| Employees
+ Org chart for the business
+ Roles and responsibilities
+ Hire dates/tenure
| Describe what tech platforms or systems are in place and used by the business for the following functions (i.e. GL/Accounting – "QuickBooks Online")
+ Customer Relationship Managment/Sales
+ Enterprise Resource Planning/Operations
+ General Ledger/Accounting
+ Estimation
+ Documentation
Once you have provided a potential acquisition partner with the Initial Diligence Requests, they will review all of the information to understand the trends in the financials and job data, then move into the collaborative discussion part of the process. This is where they will look to get more color on the business and better understand the story behind the numbers.
As you progress through the diligence process with a potential partner, you will get a good sense of how they think about the business, what metrics they care about, and any trends they are seeing. In some cases, these conversations can lead to new ideas for improved ways of monitoring the performance of your business and tracking data, which can be a win-win for everyone. 
Even if you ultimately decide not to go down the path of selling in the near future, preparing yourself and your company for a future sale by organizing these standard diligence materials now will make a positive impact on your current operations and give you confidence when the day comes to explore a transaction.
Together, we turn Chaos into Calm.
Griffin Brand, VP of Corporate Development

P.S. As always, let us know if there are any topics you’d like us to discuss in the future. If you know someone who could benefit from this information, please forward this their way.

| What we look for...
+ Residential water mitigation focus
+ Independently owned
+ Strong leadership team
+ Growing, scalable business with a great local reputation 
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HighGround 3701 W Royal Ln. Irving, TX, Texas 75063

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