Credible vendor due diligence (VDD) is vital in controlling the narrative of a transaction, but the remit and timeframe has been expanding over the last decade to give businesses an early view on possible buy-side questions, and opportunities to implement late-stage value creation. If areas to investigate arise, organisations that conduct vendor due diligence can address issues before they impact valuation or disrupt sale processes.
How Onefourzero Approaches Vendor Due Diligence
Onefourzero engages with assets throughout the private equity lifecycle. On the sell side, we work from exit readiness all the way to comprehensive vendor due diligence reports for data rooms. Our VDD, as with our buy-side work, leverages outside-in data to complement and validate internal metrics. The data we use is independent and, as a result, comfortably received by buy-side investors.
The onefourzero VDD process involves a comprehensive audit of internal data alongside a market review, where we identify areas of an asset that offer clear advantages. Many of our clients conduct this exercise early in the sales process. However, since the due diligence work can help organisations devise last-stage value creation strategies, we provide recommendations for actioning these opportunities.
Case study: Pan-European e-commerce asset
We recently performed VDD on a pan-European e-commerce asset. We identified strengths in its marketing execution and on-site conversion that gave the current owner confidence in their thesis that the business possessed solid foundations for further growth under a new owner.
In the course of our work, we also identified some technical improvements that represented low-cost, high-impact levers to further improve the asset prior to sale. Actioning these recommendations would increase the likelihood that the asset sells for a higher price.
Controlling the Narrative
To summarise, conducting credible due diligence allows sellers to control the narrative around an asset by strengthening the quality of the information provided to buyers. Furthermore, vendor due diligence on the sell-side allows for early identification of issues and offers time and resource savings leading to smoother transactions. To summarise, conducting vendor due diligence is beneficial to all parties in a sale, as long as it is conducted by a credible investigator.
