Due diligence is the act of corroborating the possession of various material assets the seller of a CPA claims to have. It is a necessary component of buying and selling and is usually carried out in regards to specific information that the buyer gives to the seller.

Below are the steps that all buyers and sellers should know and follow to make sure that their personal information remains private, risks are diminished, and the whole process is properly orchestrated.

Sign an NDA beforehand

The best way to secure maximum value for yourself is by ensuring than a non-disclosure agreement is signed. This should be the first thing you do when dealing with buyers. A well written NDA will completely prohibit a buyer from sharing any sensitive information relating to your sale with either the general public or the industry at large. It will also prevent them from reaching out to your customers or staff too. You are exposed to great risk if you don’t have an NDA.

Furnish the comprehensive summary of financial information 

After an NDA has been signed, redacted versions of financial information will then be provided to the buyers. This will ensure that they are fully informed about the CPA firm they are considering and will include such information as: the work they do, staff, profitability, and various other important pieces of information they would need to have. 

The strength of this comprehensive information can lead to many different offers which will increase the company’s value and increase the amount offered at sale.

Decide upon an LOI

An LOI is a document which lists the offer of the buyer including the price, terms, conditions, sales schedule, and contingencies. The contingencies will determine the exact dates by which due diligence, funding, and the actual sale must take place. Should the buyer miss the deadline for due diligence, they may no longer be committed to buying. If they refuse to make a formal offer, they’re probably not serious about buying.

Performing Due Diligence

This is the point at which due diligence must be performed. The buyer needs to get all of the pertinent information pertaining to the CPA within two or possibly three meetings. This is also where the seller can properly examine the buyer by looking at their qualifications, credit history, managerial approach, and more.

Set a rational timetable for this process with specific times and dates for various milestones. Should the buyer try to force a drop in the sale price or postpone this process with no good reason, then they may be having second thoughts.

It’s highly unlikely that you have the time, skills, or experience to orchestrate this process on your own and that’s why you need a highly skilled sales team working on your behalf. They will know the legal loopholes that could put you at risk as well as certain industry best practice techniques that will put you in the best possible position to receive maximum equity from the sale of your CPA.

Succession Link has built an online platform that makes it easy and convenient for you to find the perfect buyer for your financial practice or to locate a practice that is the right fit for an acquisition and the growth of your business. Click the link to find out how Succession Link can help you. 

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