Are you a would-be acquirer who is keen to kickstart the M&A process? If so, then we have some friendly insider advice to impart – don’t beat around the proverbial bush during the due diligence process.
After all, this stage of the acquisition process is arguably the most crucial to the success of your deal, and you shouldn’t be afraid to ask plenty of detailed questions of the seller during this phase. It’s important to build up a detailed picture of the business you are buying, including how it works, its financial outlook, and any potential pitfalls that could occur post-sale. The more you know, the more likely you will be to make an informed decision with the potential to maximise your deal’s value in the coming months and years.
But what kinds of due diligence questions should you be asking? We’ve compiled a list of some of the most essential queries you should be putting to the seller, as well as some questions to ask yourself before the final legally binding contract is drawn up and you’re committed to the deal come what may.
General questions to ask sellers
First things first, here are some crucial questions you can ask even before you reach the due diligence stage of the acquisition process – for instance, when you are still weighing up several potential targets and narrowing them down.
- Why are you selling up?
- Has the business been valued, and if so, how?
- What achievements (and obstacles) has the business experienced over the last few years?
- What liabilities does the business have?
- Is the business involved in any legal disputes?
- Who are your main competitors?
- How is the company structured?
Questions to ask about your target’s financial health
Gaining a comprehensive overview of your target’s financial status is bound to be your primary concern – and rightly so. But what questions should you be asking to gain as nuanced a picture as possible?
Here are some suggestions.
- Which products/services make up the bulk of the company’s revenue?
- What are the company’s annual profits?
- Can you provide profit and loss statements / bank statements / a quality of earnings report / evidence of gross revenue?
- Can you provide a comprehensive list of all assets?
- Can I see your tax returns for the last three years and any other tax-related documentation?
- Can you provide financial projections for the coming year?
- What trends/patterns do your sales follow?
Operational queries to consider
Having detailed understanding of a company’s operations is crucial before you sign any contracts.
By taking time to acquire a solid foundation of knowledge, you will be able to highlight areas where the company is doing well and pinpoint any operational inefficiencies which could be tackled post-sale.
You will also gain a nuanced understanding of the employees you will be taking on, what services they provide to the company and how they are reimbursed for those services.
- How many staff do you employ?
- What wages and contractual benefits do your staff receive?
- How many key customers do you have?
- Can you detail the company’s workflows?
- What is your product’s lifecycle (if relevant)?
- Do you have all relevant licenses, certifications and accreditations?
- What sales and marketing methods do you use?
IP questions to ask
Intellectual property should be another feature on your due diligence checklist, as failing to do your homework in this regard could land you in some serious legal hot water!
- Who is the owner of the company’s IP? Who has the rights to its usage?
- When was the IP patented?
- What income is generated by the IP?
Things to ask yourself
Now you know what to ask potential acquisition targets, it’s a good idea to ask yourself some crucial questions too, as the answers you give can help you make the right decision about which business to buy.
These questions can include:
- How would buying this business benefit your company?
- Are you knowledgeable enough about its products/services?
- Do you have the finances and the resources available to run this business as well as your own?
- What are the risks of buying this business?
Why you may want to hire a business broker
As you can see, there are a lot of questions and areas of potential concern that you should cover when it comes to due diligence.
Understandably, having all these queries and uncertainties to address may create some anxiety and possibly even stress, particularly as you ponder the immensity of the transaction you are embarking on.
The good news is that there are experts available, in the form of business brokers, who can provide valuable assistance throughout every stage of the process, including due diligence. Not only can they help you choose the right questions to ask, but they can ask them on your behalf.
They can also mediate with the seller, assist with negotiations, and connect you with financial and legal specialists who can help you reach successful deal completion while ticking all the right boxes.
Of course, hiring a business broker will require the payment of a fee for their services – but if you want an expert hand to guide you through the M&A process and remove all the hassle from your shoulders, then you are likely to find their assistance invaluable.
Acquisitions made simple with Harris Acquire
If you are keen to simplify and streamline the acquisition process and kickstart your M&A strategy in 2025 and beyond, our experienced and knowledgeable team at Harris Acquire would be more than happy to help.
We pride ourselves on providing a comprehensive Acquisition Finder and Management service spanning every stage of the M&A process – from finding suitable targets to managing due diligence. We can remove all the hassle and hard work from your acquisition and put you firmly on the path to deal completion in no time.
To find out more about our services and how we can help you buy the right business, give us a call on 01926 757100 or send an email to Hello@harrisacquire.com.
