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Almost anything you can imagine should be part of the pre-sale due diligence. If a selling company (seller) wants to receive the best terms and price, they must perform a certain amount of their own due diligence.

While not comprehensive, the following are the key aspects of what should be completed:

  1. Designate a leader to coordinate all of the internal and external personnel involved.
  1. Establish a meaningful timeline to complete each critical task.
  1. Ensure that your tax advisers are in-place and very competent. These should include, at a minimum, your accountant, wealth manager and investment banker.
  1. Complete and document the company’s standards for at least financial controls; insurable risk (property, product, and employee practices); and, benefits plans.
  1. Review legal and contractual agreements in-place. Determine ownership of assets, especially IP.
  1. Understand work place flow, efficiency, and culture. Assess correcting actions required.
  1. Ensure that you understand and can explain profit margins for each service/product.
  1. Detail the assumptions underlying the adjusted EBITDA calculation.
  1. Calculate the contractual/recurring revenue.
  1. Provide explanations for any potential customer concentration.
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