A private equity investment isn’t complete without a thorough due diligence process. It is essential to identifying the areas that generate value operations changes before investing in any business.
The process typically begins with the creation of a confidential memorandum (CIM) that is a document that contains financial information and a description of the management team, and commercial details, like details on the target company’s customers and products. Private equity firms that are smart will then add to the CIM by asking questions that are more specific, and using an electronic data room to collect documents from the target company’s management team.
Legal due diligence is a vital step, particularly when it is related to buyouts. The business plan for a purchase usually involves cutting staff, selling assets, or closing offices or facilities – all of which can unintentionally generate legal issues.
In the current era of high multiples of purchase, it’s more crucial than ever before to conduct thorough commercial and market due diligence. A thorough approach to due diligence can help private equity firms create a well-thought-out day-one growth strategy and unlock value faster than they would have thought possible.
To find out more about how Baker Tilly can assist you by ensuring due diligence, reach out to our team. We’re here to help succeed in your next transaction. Credit for Featured Image: Credit to Getty Images.