Advertisement CORPORATE GROWTH & M&A JANUARY 19-25, 2015 S-17 M&A TRANSACTIONS The importance of sell-side due diligence BY ANDY JENKINS KEY BENEFITS The value proposition and broader With a strong seller’s market, the role of acceptance of sell-side due diligence involves sell-side due diligence has never been more understanding sellers’ motivations and critical. Sell-side due diligence is adopting a buyer’s perspective to becoming more prevalent and more maximize investment value: widely accepted by the marketplace as a standard process to streamline deals. This process helps the seller to r Improves accuracy of the historiavoid surprises, maintain control of cal and projected financial information the process and minimize disruptions included in the marketing materials — preserving value and increasing the r Identifies adjustments that posiprobability of a successful transaction. tively impact EBITDA (i.e., potential The value of sell-side due diliacquirers only notify the seller of gence is optimized when working in JENKINS negative EBITDA adjustments) conjunction with investment bankers. There are distinct roles in the transacr Minimizes surprises and maximizes tion process, and when they are properly transaction value by adding credibility and defined and filled, the seller is much more objectivity to the process, including situalikely to fully understand the investment tions where a financial audit has not been thesis and maximize the investment value. completed The value of sell-side due diligence is optimized when working in conjunction with investment bankers. r Accelerates the buyer’s due diligence and the timing of the transaction, thus, reducing the risk of retrading r Assists with developing and positioning financial information for the carved-out portion of the business r Maximizes after-tax proceeds by addressing risks and using an optimal deal structure r Increases competition between buyers and reduces buyer negotiations post LOI Companies often think they can perform the necessary due diligence requirements in-house prior to a potential sale. However, companies with limited internal accounting and tax resources may want to engage outside specialists for an initial assessment to grade how well they are prepared for the transaction process. Having an independent sell-side due diligence report that is fair and balanced certainly brings more credibility to the transaction process. A comprehensive sell-side due diligence process helps a seller anticipate buyer concerns and satisfy expectations. It is a valuable tool to help ensure that the seller retains value, saves a significant amount of time in the transaction process and retains enough control of the process to ensure that a resulting transaction is advantageous for both parties, not just the buyer. Nick Gruidl and Andy Jenkins are Partners with McGladrey LLP. Vipul Barbhaya is Director for McGladrey LLP. Contact Jenkins at 614-456-2801 or Andy.Jenkins@mcgladrey.com. p $15,000,000 Owned Development Jackson Township, Ohio December 2013 $23,000,000 Owned Development Gainesville, Florida July 2014 September 2014 A Signet Enterprises Company has acquired Spectrum Orthopaedics Medical Center Signet will develop and own the University of Florida Infinity Hall, a five-story, 97,000 square foot living learning center containing a 92-unit, 308-bed student residence hall and educational center for the Entrepreneurship Living Learning Community. Chicago, Illinois A leading provider of managed review and legal staffing www.eTERAconsulting.com Signet Enterprises sponsors unique opportunities in specialty real estate development, portfolio company acquisitions, growth capital and technology commercialization investments. Since 1995, the partners of Signet Enterprises have united an entrepreneurial vision with the experience to turn opportunities into realities while partnering with some of the finest institutions in the country. Real estate private equity for healthcare, higher education and public private partnerships Portfolio company acquisitions in manufacturing, materials and business services Growth capital and technology commercialization in healthcare technology, business services, materials and manufacturing REAL ESTATE|PRIVATE EQUITY Call or email to learn more: Edward Matuszak 330.762.1950 ematuszak@signet-enterprises.com www.signet-enterprises.com VISION. POWERED BY EXPERIENCE. Crain’s Cleveland Business Custom Publishing