Luciana Magnolo Onofre
Lawyer at Marcos Martins Advogados
When a company acquisition process is considered by the buyer, there is always the concern and recommendation to carry out an analysis and investigation of the company to be acquired (targets), since, based on this investigative process, information is inferred that will be reflected in the entire operation, especially in the acquisition price.
This process of identifying liabilities and assets, risks and their measurement is usually identified in a Due Diligence process , when there is a potential sale and purchase operation, usually required by the buyer.
Due diligence seeks to verify the financial strength and potential of the business to be acquired so that the negotiation of the acquisition can be carried out in a more transparent manner, leading to a satisfactory conclusion.
What many entrepreneurs don’t realize is that it is possible to anticipate any issues that may arise in the negotiations of a future sale or purchase by carrying out a process prior to the Due Diligence, called Vendor Due Diligence. In this case,theseller itself will independently verify financial, fiscal, tax, legal, labor and regulatory issues, the result of which will provide an in-depth view of the company, pointing out adjustments, corrections and procedures to be adopted in order to mitigate issues unfavorable to the company and/or business being sold.
The main focus of Vendor Due Diligence is to enable the seller to identify and deal with the risks of the intended transaction.
This is preventive work that can result in significant gains by giving the seller greater control during the sale process, providing more transparency in the negotiation, as well as saving time with regard to controversial issues that may arise from the buyer in the future transaction.
After the process of identifying and mitigating operational risks, the company will be better prepared for the sale and purchase operation and more prepared for the due diligence carried out by the buyer.
In general terms, the Vendor Due Diligence process allows the seller to:
- prior analysis of the company’s potential risks before involving the would-be buyer
- dealing with the mapped risks
- definition of the timeframe for the sale and the desired purchase price, taking into account existing debts, passive and active surpluses
- demonstrates stability and concern for the sustainability of the business
- helps manage the objectives and expectations set for the sale process
- reduces the chances of the buyer failing to complete the deal during due diligence , since the risks will have been mapped out and dealt with
Vendor Due Diligence is a procedure that guarantees business owners visibility of their operations, but from the point of view of a buyer, with the aim of making the intended sale, legal and documentary structure compatible and mapping risks to prepare your company for a successful sale and purchase operation.
Marcos Martins Advogados reaffirms its commitment as a business partner and is available to seek strategic solutions to the specific needs of each operation, always attentive to regulatory changes that affect the interests of its clients.
