Can due diligence findings affect purchase contract negotiations?
We may learn that a seller’s attractive financial results are the result of inconsistent accounting practices, such as deferring expenses to make the company look more profitable on a continued basis or pooling revenue into one year to the detriment of another year. These practices can affect the value of the company and, therefore, what you should pay for it. Or, we may learn that a company is dependent on a particular customer. In that case, the buyer should confirm that the customer will stay with the company when the business changes hands. We try to identify issues during due diligence so you do not find out about them after the sale. How can due diligence provide buyers with important post-sale knowledge? We often identify integration issues. In other words, we consider everything you should know about the business after you own it. For instance, are the accounting personnel competent and will they be dedicated to the new owners? In instances when a division of a company is for s
