Pre-sale due diligence — 4 benefits for shareholders preparing to exit

By Brabners

Having advised business owners and shareholders through numerous sale and exit processes, one trend that we’re seeing more and more is the use of pre-sale due diligence.

Historically, many shareholders would only begin thinking about due diligence once a buyer had been identified and a transaction was underway. Today, however, more businesses are choosing to undertake their own review before going to market.

That shift is hardly surprising, as buyers are conducting more detailed investigations, timetables are becoming increasingly compressed and all parties want greater certainty around deal execution. As a result, businesses that prepare early are often better positioned to achieve a smoother process and stronger outcome.

Here, Rachel Brassey from our award-winning corporate team explains what pre-sale due diligence is and breaks down why more shareholders are undertaking it before going to market.

What is pre-sale due diligence?

Pre-sale due diligence involves a seller and its advisers reviewing the business through the same lens that a prospective buyer is likely to adopt. Rather than waiting for issues to emerge during a buyer's investigation, shareholders can identify and address potential concerns before they become obstacles to a transaction. Effective preparation can help to maximise value, reduce execution risk and provide greater control over the sales process.

Four benefits of pre-sale due diligence

1. Identify & resolve issues early

One of the principal benefits of pre-sale due diligence is that it allows sellers to identify legal, commercial and operational issues before they’re scrutinised by a buyer. Common examples that we’ve come across include incomplete corporate records, historic Companies House filing issues, undocumented commercial arrangements, inadequate intellectual property protection, employment concerns or missing property documentation.

Addressing these matters in advance is almost always easier and cheaper than attempting to resolve them under the pressure of an active transaction. Buyers frequently view unexpected issues as indicators of broader risk, which can lead to price reductions, increased warranty protection or demands for indemnities.

For further reading and the full article, please visit the article on our website:

https://www.brabners.com/insights/journey-to-exit-2/pre-sale-due-diligence-4-benefits-for-shareholders-preparing-to-exit