Credible vendor due diligence is becoming more important to prospective buyers and is increasingly commissioned earlier in a planned sale to identify late-stage value creation opportunities and exit preparedness enhancements.
At onefourzero, we engage with assets throughout the entire private equity lifecycle. On the sell side, we work from exit readiness to comprehensive vendor due diligence reports for data rooms. Our vendor due diligence leverages outside-in data to complement and validate internal metrics, providing added comfort to the buy side.
Why Do Firms Commission Sell-side Diligence?
Sell-side diligence is vital for three core reasons: it allows firms to control the exit narrative, highlight growth opportunities and contextualise challenges.
Control the exit narrative
Sell-side due diligence allows the company to control the exit narrative by producing a comprehensive report that presents the asset in the best possible light. By taking proactive steps to address potential concerns, the seller ensures that the buyer clearly understands the asset’s many strengths. This, in turn, will help attract higher offers from potential buyers.
Highlight growth opportunities
Sell-side diligence also highlights growth opportunities for future owners. For example, using present and historic data sets, we create viable growth models or stress-test assumptions surrounding commercial growth across customer acquisition, conversion rates and customer retention. Additionally, we model potential headroom by analysing untapped white space and road map the necessary skills, tools and KPIs that help buyers realise this latent commercial potential.
But what does this look like in practice? Recently, a private equity firm approached onefourzero to conduct diligence on a protective coating manufacturer. Alongside market sizing, share and growth analysis and audience profiling, we analysed online search behaviour to identify areas of high-growth opportunity in product development, potential consumer-facing brand partnerships and adjacent marketing segments.
Seeing opportunities for growth, the private equity firm acquired the protective coating manufacturer. After the sale went through, we also advised on post-acquisition value creation strategies which would create tangible commercial value for the firm. This work enabled us to update the metrics included in diligence work to show the impact of value creation efforts.
Finally, sell-side diligence allows sellers to contextualise asset-specific challenges. For example, buyers may want to know how the asset performed in a tough market compared to competitors. With many markets braced for an economic downturn, potential buyers need to determine if the asset is likely to be resilient.
Onefourzero’s sell-side reports utilise asset-specific commercial data sets to allow potential buyers to understand how an asset has performed compared to its competitors in varying economic conditions. The reports are also low-latency—engagements can be as efficient as two weeks from start to finish.
Contact Us Today
More firms are commissioning sell-side diligence, as it enables them to control the exit narrative, highlight potential growth opportunities and contextualise asset-specific challenges. Contact us today if you’d like to discuss how we can help demonstrate your company’s value to prospective buyers.