When considering due diligence, the focus is often on the buyer's process in an M&A transaction. They thoroughly investigate the business they are about to invest in, ensuring there are no hidden pitfalls. However, due diligence is also important from the seller's perspective. This process not only facilitates a successful sale but also helps ensure the business continues to thrive post-transaction.

Here are key aspects to consider for effective sell-side due diligence:

Financial viability of the buyer
One of the foremost considerations is confirming whether the potential buyer has the financial resources to purchase your business. This might involve evaluating their capital or ensuring they have secured external financing. It's crucial to ascertain this early in the process to avoid wasting time on negotiations that cannot be financially backed.

Legal standing of the buyer
Assessing the legal standing of a potential buyer is another fundamental step. This includes checking for any criminal records, ongoing legal cases, or past legal issues that might disqualify them from owning your business. Additionally, verify if they possess the necessary licenses and credentials relevant to your industry. This ensures compliance with sector-specific regulations and avoids future legal complications.

Independence from third-party due diligence
While buyers often secure outside financing, and those lenders will conduct their own due diligence, sellers should not solely rely on this. Lenders have different priorities and criteria, which might not align with what is critical for your business. Conducting your own thorough due diligence ensures you have covered all bases specific to your business's needs.

Professional compatibility and future plans
Beyond financial and legal considerations, it's vital to determine if the buyer is a good fit for your business from a professional standpoint. Assess their experience in your industry and their professional qualifications. Furthermore, scrutinise their plans for the business post-sale. Understanding their vision, planned changes, and how these align with the current business model is crucial. This step is especially important if you retain any stake in the business or if your earnings are tied to its future performance.

Evaluating the buyer's character
Finally, consider the character and reputation of the potential buyer. This can often be overlooked but is essential for ensuring a smooth transition and future success. Engage with their current or former business partners and employees to gauge their working style and compatibility with your business culture. A buyer with a good track record of professional integrity and a collaborative approach can significantly enhance the post-sale integration process.

In summary, sell-side due diligence is a comprehensive process that goes beyond financial and legal checks. It involves evaluating the buyer's financial capacity, legal standing, professional suitability, future plans for the business, and their overall character. By meticulously conducting due diligence from the seller's perspective, you can secure a favourable deal and ensure the continued success of your business.