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Vendor due diligence is often used as a negotiation tactic in disposals processes and is typically used when a vendor has a good quality offering and is expecting ample offers, but in the same time is not prepared grant exclusivity to any one potential purchaser too early in the process.
The principal benefits to a client of undertaking vendor due diligence are:
- to reveal any significant issues at an early stage;
- to reduce the time needed to complete the transaction;
- to provide buyers with greater certainty over the nature of the business, helping to speed up pricing decisions and views as to the potential level of gearing;
- to help add credibility to the facts, figures and information provided in the information memorandum;
- to give the vendor more control across the whole process.
RSM BG also usually gets involved in the interaction with potential buyers, investors and ultimate buyers:
- Copies of the reports produced by RSM BG are usually made available to potential investors, subject to a release confidentiality commitment letter;
- RSM BG Ltd. discusses with counterparties relevant issues of competence and answers questions of potential investors if necessary and so instructed by its client;
- If requested by a potential investor, with client’s permission, RSM BG may undertake additional work as necessary to meet their comfort requirements and preferences;
- Once the ultimate investor has been identified and negotiations are complete, RSM BG adds the ultimate investor to the formal list of addressees of the report and the duty of care is extended to include the ultimate acquirer or investor involved and, if required, other concerned parties.
