CPA / Business Advisor: Final Due Diligence and Documentation

by Martin Hansen

CPA / Business Advisor: Final Due Diligence and Documentation

You and your client are now close to the finish line because:

  • Your client’s business documentation is in order and in the correct format
  • The business property(s) looks good (inside & out)
  • You and your client have a range of value for the business
  • One or more buyers for the business have been identified
  • A term sheet has been successfully negotiated and signed
  • Your client has retained a business transactional attorney

Now your client must complete the final due diligence review and document the transaction with your assistance.

First, final due diligence (FDD). This process will vary greatly depending on the type of business being sold, and on the expectations and requirements of the buyer. Typically, FDD will be the collection or verification of information the buyer will need in order to operate the business going forward, or of information that was not disclosed or requested during the initial due diligence.

As an example, some sellers do not like to provide the business’s tax returns, detailed customer lists or other sensitive information prior to the execution of a term sheet. FDD is the time you work closely with your client and oversee the release of this information. Also, there will be information requested that is specific to the type of business/industry that would not be on a standard due diligence list request. And finally, the buyer will need detailed information on specific assets, such as machinery, vehicles, inventory, personnel, etc. that may not have been provided in the initial due diligence phase.

Once the buyer provides this “final list” of required items, electronically store them so the buyer can review and approve. Once you and your client have completed the FDD process, you will enter into the documentation phase of the transaction and your client’s business attorney will take over until the “close”.  However, you will need to still work closely with your client.

There will be:

  • additional document requests by the attorneys that you may need to assist your client to fulfill
  • price allocation conversations
  • tax treatment for client personally
  • change-over or hand-off of the accounting programs
  • change-over or hand-off of the IT and any other operating computer programs
  • other ancillary or miscellaneous matters or tasks

It is not unusual with certain transactions to have 20+ different documents in order to properly “paper up” a deal. As you can imagine, there will be some back-and-forth with the final due diligence requests as noted above, just as there will be with the documenting the transaction.

Once all of the final due diligence documents are complete and the documentation is complete, you and your client, along with the buyer, will move to the final “Step” of the process — the Close and Transition.

For a results-driven workflow to guide the entire transaction, including assisting your client with the process of completing final due diligence, consider using DealMaker360. Good luck!

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