DATA (Due Diligence); it’s all in here… somewhere

Historically we’ve all helped a client Buy or Sell a business… and in doing so, of course, we went straight to the DATA, right(?).

What do I mean by this?

Well, we checked the numbers and a crossed checked them with market norms and formed a position. Rightly or Wrongly, this was through years of experience, external advice or appointed advisor, tools of the trade and maybe some ‘gleaned’ intel from competitors, whom could end up being the best buyer.

But what is it the parties are normally looking at?
Focusing on our Industry, the Accounting Profession, as an example:

We presume, a completed ‘Information Memorandum’ detailing the following:

• Revenue – Reoccurring vs Specials / Advisory
• Services – How one achieves the Revenue
• Client Types – Individuals, SMSFs, Trusts, Partnerships, Companies, Audits
• Bankings – Two years+ of monthly takings
• Staff – Roles and Remuneration
• WIP and Debtor – lock-up position
• Systems – Software choices
• Plant & Equipment – Computers / Furniture

On premises Due Diligence we fact check all of the above as well as:

• Client List – view only
• Client Files – show the workings approach
• Bankings vs Billings – aligned for a cash or accrual valuation methodology
• ATO portal – lodgements, tax position (tax debt)
• The Financials – Yes, it could be only here that they are released in full

OK, this is a watered-down list but fairly straight forward, right?
Nope… because the data tells the story to what you are looking for or not looking for.
Remember, you are now emotionally involved and this unless held in check,  can lead to the wrong decision. One needs to look beyond the data. If you haven’t done due diligence on the ‘Cultural Data’, you are heading for tough times. This goes both ways, Purchaser to Vendor (Due Diligence) and Vendor to Purchaser (Reverse Due Diligence).

We must importantly be aware of what is being released, how long it takes and why. Purchasers will always take note of length of time taken to receiving data. It is concerning if it takes time and the interpretation is generally a negative one. They don’t get why you could want to divest but still not have everything organised and it to be released in an instance. To the Purchasers, we have to say, “Sorry”, unfortunately it’s a very common story. The Vendors, being Accountants, are reluctant at the best of times and generally very private about their dealings.

The cultural data is generally innately mapped-out, from the first interaction and going forward for as long as possible. The practice’s and principals’ idiosyncrasies set the tone; therefore, need to be mapped out, without excuse-giving and the strongest position maintained, from inception, knowing when to walk away. Beyond the magic quantum that fits ones’ business ideology, awareness and integration of the cultural gap is a proactive imperative.

The culture needs to be carefully charted and tracked with an action plan over a timeline as is with any Divestment, Acquisition or Merger integration. When one thinks ‘WHAT’ is being bought and for ‘X, Y, Z’ reasons, the thought and questioning around ‘WHO’ best be at the top before one assumes it makes sense just because one can make Dollars and Cents do so.

In short, going forward, it’s important to implement structured thought around the cultural data and what its due diligence should look like. From day ZERO (today / now), plan for it, action it with precision, use haste when needed, continue to shape it and stay flexible of mind throughout – it is part of the journey.

Side note: We are seeking time to talk with practices / practitioners thinking about a sale or would like to prepare for one.

Lets talk; mobile number is best 0408885944