In this video, we’re discussing the importance of the due diligence phase in the sale of a company. My name is Dennis Spector from Spector Solutions, and with over 50 years of experience as an attorney, CPA, and with a master's in economics and operations research, I’m here to explain how we can help you through this complex process.

Here’s how due diligence works: After sending out 50 or so blind packages to potential buyers, we might receive around five serious offers. This phase is often referred to as the “horse race,” where competition helps drive up the sale price. After narrowing it down, we have potential buyers sign a non-disclosure agreement (NDA) and answer their questions before selecting a few to visit the company.

Once we select a preferred buyer, we enter into an exclusive due diligence period, similar to selling a house. This is when the buyer has the power, and they can sometimes use delay tactics to pressure you into lowering the price or to frustrate you with endless requests for information. For example, one private equity firm we dealt with sent over 145 schedules and requests for documentation to overwhelm us. Fortunately, we were prepared and knew how to handle it.

Buyers will only close when they’re confident they understand the business and can’t lower the price any further. The due diligence period often takes much longer than promised—sometimes 90 days or more—until the buyer is satisfied.

During this time, it’s crucial to keep running the business and answering the buyer’s questions, which can be overwhelming. That’s where we come in. My team and I handle the intricate details of due diligence, allowing you to focus on keeping the business running smoothly.

Due diligence is the final step before the sale, and we ensure that all aspects, including financing and escrow, are handled correctly. We’ll cover more details on these aspects in future videos.