Vendor due diligence

Overview

When a company is being sold or is selling off one of its parts, it needs to provide an independent in-depth report on its financial health to potential buyers. This is called vendor due diligence and is a comprehensive assessment of the business to be sold commissioned by the vendor at the beginning of the sale process and addressed to the purchaser.

Our vendor due diligence specialists provide comfort to both buyers (acquirers) and sellers (vendors) with an independent view of the business, encompassing its performance and prospects. Our service aims to address the concerns and issues that may be relevant to even the most demanding purchaser, and typically covers financial, tax, human resource and IT matters. It provides vendors with greater control over the sale process and the timing of sale, which can, in turn, help secure a higher price for the business.

 

Issues you may be facing

  • Your strategy involves maximising the saleability of your business, whether through a carve-out of business units, or by the sale of existing entities.
  • You wish to retain control over the sale process.
  • Your company is in the process of restructuring/re-focusing its activities.
  • You want to reposition your portfolio focus on core businesses, or return value to shareholders.
  • You have started to feel pressure from financiers as a result of deteriorating financial ratios.

 

How we can help you

  • Provide vendors with greater control over the sale process, information and the timing of sale, which can help secure a higher price for the business by minimising the uncertainty discount in bidders’ valuations.
  • Provide purchasers with greater certainty over the nature of the business and the characteristics of its cash flow. This helps pricing decisions and the level of gearing the structure will support.
  • Help manage expectations of all stakeholders.
  • Provide insight and better use of time during the exclusivity phase of your sale process.
  • Reduce disruption to the business as the sale process is more controlled.
  • Minimises need for ‘additional’ due diligence work.
  • Controlled release of sensitive company information to short-listed bidders.
  • Help add credibility to the facts, figures and information provided in the sales memorandum and ability to address issues raised early in the process.
  • Remove the necessity for a buyer to have substantial access to do their own due diligence work as they will be able to rely on the vendor due diligence report.
  • Early identification of value critical issues, providing the option to "regroup and fix" outside the glare of publicity.
  • Rapid execution of the divestment from the point of announcement. This reduces the business disruption and accelerates transfer to new owners.
  • Reduces uncertainty risk for financial buyers, potentially justifying higher offers.

 

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Contact us

Peter McCrystal

Peter McCrystal

Partner, PwC South Africa

Tel: +27 (0) 11 797 5275

Jan Groenewald

Jan Groenewald

Partner, PwC South Africa

Tel: +27 (0) 11 797 5380

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