Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m back again with Kimberly Wood, an Audit Senior Manager and one of the faces of the PKF Texas Transaction Advisory Services Team. Kimberly, welcome back to The Playbook.

Kimberly: Thanks for having me.

Jen: Last time you gave us an overview of the due diligence process. What are some ways to facilitate due diligence?

Kimberly: There are five key ways that the buyer can help facilitate this process:

  1. They can get their house in order, both financially and operationally.
  2. They can show a history of growth. They want to be able to demonstrate or perform a deep analysis of their historical branch level sales. This will just help the buyer see and understand the story better and show their potential for growth.
  3. They want to prove their potential. They want to be able to demonstrate opportunities for revenue, profit, and market growth.
  4. They want to prevent their partners or employees from diverting the process.
  5. They want to be prepared to sell at the right time.

Jen: Perfect. So now, does this apply to both buy side and sell side?

Kimberly: These are things that the sell side will want to do to get ready for the buyer.

Jen: Perfect. We will get you to talk a little bit more about some due diligence topics soon.

Kimberly: Sounds great.

Jen: For more information about due diligence, visit PKFTexas.com/TransactionAdvisoryServices. This has been another Thought Leader Production brought to you by PKF Texas – The Entrepreneur’s Playbook. Tune in next week for another chapter.

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m here today with Kimberly Wood, an Audit Senior Manager and one of the faces of our PKF Texas Transaction Advisory Services team. Kimberly, welcome to The Playbook.

Kimberly: Thanks for having me.

Jen: You’re on our Transaction Advisory Services team, and I know you tend to handle due diligence. What is due diligence and why should somebody do a due diligence project?

Kimberly: Due diligence is an investigation of a company or a business, and basically, we are validating the information or assumptions that haven’t been provided, or that should have been provided. It’s an essential information gathering process, whether it’s for legal, operational or financial due diligence. Continue Reading What is Due Diligence and What are the Benefits?

Jen:  This is the PKF Texas Entrepreneur’s Playbook.  I’m Jen Lemanski, this week’s guest host, and I’m back again with Chris Hatten and Martin Euson, two of the Directors on our Transaction Advisory Services team.  Guys welcome back to the playbook.

Chris:  Thanks, Jen.

Martin:  Thank you, Jen.

Jen:  Now I’ve heard you guys talk about due diligence, what is it?

Martin:  On the tax side Jen due diligence really comes down to a process of investigating and examining a target company’s tax filings and tax records historically to see if there’s anything in there that may present risk or exposure that the buyer wants to be aware of so they can take that into their decision-making ahead of time before learning about those things afterward.

Chris:  From the financial reporting side of things it’s more so an income statement approach because a lot of times the transaction is based off some multiple of earnings or revenue and so as the buyer you want to make sure that there are some reliability and predictability behind those numbers, and so we kind of go in and do a deeper dive on that.

Jen:  So it sounds like it’s usually the buyer doing the due diligence, is that?

Martin:  That’s correct Jen but oftentimes the seller will also due diligence on itself.  Diligence can be a disruptive process if you’re having multiple buyers come in and multiple bidders come in and going through that process, so that can be a little bit disruptive.  And it also gives the seller a chance to find out what, if any, skeletons are in their closet before a buyer comes in and does diligence and so it can occur on both sides.

Chris:  Definitely.  To further Martin’s point it is a very disruptive process and so they want to make sure that they’ve got all their historical records, their financial statements, everything else in order to add a little smoothness to the process.

Jen:  Perfect.  Well, I think we might need to dive into the sell side a little bit later, can I get you guys back?

Martin:  Absolutely.

Chris:  We can do that.

Jen:  All right, perfect.  To learn more about how we can assist you with potential transactions visit PKFTexas.com/transactionadvisoryservices.  This has been another Thought Leader production brought to you by PKF Texas The Entrepreneur’s Playbook.  Tune in next week for another chapter.

Note: Running weekly in FromGregsHead.com, PKF Texas – Entrepreneur’s Playbook® is a continuing series of tips brought to you by Greg Price. These run Sunday at noon during the BusinessMakers Radio Show on 92.1 FM.

Greg: This is PKF Texas and another chapter of the Entrepreneur’s Playbook. I’m Greg Price, director of consulting solutions, and I’m here again with Dan Ramey, an audit director at PKF Texas. Dan, welcome back to the Playbook.

Dan: Thank you, Greg.

Greg: So, Dan, the last time we were here, the subject was mergers and acquisitions and due diligence, and I think you covered the perspective from, say, the seller. Now we’re talking about the buyer. What’s different about that?

Dan: Well, Greg, with the buyer, we actually sit down with the buyer, really understand their objectives, their strategy, what they’re trying to do with this company, and really what are their concerns on what they already know about that. So, from that, we develop procedures to go into the company, look at whatever those areas are.

Greg: So, what’s the value when you sit down in advance and cover some of these concerns?

Dan: The key is that we can focus. When we get to the client, we can focus on what they’re looking for. When we get into those companies, do a deep dive into those areas, really find out what’s going on. The key is we don’t want any surprises after the acquisition. We also want to be sure that the forecasts that the client has developed are correct.

Greg: That’s a great value proposition, to give them the answer of no surprises with the potential target. Thanks for sharing that with us today.

Dan: Thank you.

Greg: You bet. This has been another Thought Leader Production, brought to you by PKF Texas: The Entrepreneur’s Playbook. Tune in next week for another chapter, and remember, if you’re looking at buying or selling companies, give PKF Texas a call.

Note: Running weekly in FromGregsHead.com, PKF Texas – Entrepreneur’s Playbook® is a continuing series of tips brought to you by Greg Price. These run Sunday evenings during the BusinessMakers Radio Show on KPRC 950AM.

Greg: This is PKF Texas and another chapter of The Entrepreneur’s Playbook. I’m Greg Price, director of consulting solutions, and I’m here again with Dan Ramey, an audit director of PKF Texas. Dan, welcome back to the Playbook.

Dan: Thank you, Greg.

Greg: So Dan, one of the areas that you work in is mergers and acquisitions within our forensics practice. Can you share what due diligence efforts you do when you’re doing one of these projects?

Dan: I can do that. We represent two sides. We frequently represent a buyer, or we represent the seller. On the seller side, let’s talk about that one first. We go in with the perspective of a buyer, and we go through, and we look at your transactions, your records, your customer base, all of that with the eye of being sold.

Greg: So is there something you’re looking for when you’re doing one of these engagements?

Dan: We’re looking for anomalies that the buyer might find as he goes through his side of due diligence. And as he’s looking for things that might not be appropriate, accounts that are long overdue, things of that nature that he would remove from the company’s balance sheets and income statements, we want to clean those up ahead of time and make it more transparent and accurate for the buyer.

Greg: So in essence, what you’re doing is representing the seller, but acting like a buyer. Is that correct?

Dan: That’s exactly right, Greg.

Greg: So what’s the benefit of that to the buyer?

Dan: The benefit is that the studies show that there’s usually a premium for companies that have an easy due diligence where they’re transparent, and they can show issues ahead of schedule to the buyer without the buyer finding them.

Greg: And that’s the value in doing one of these due diligence engagements.

Dan: Absolutely.

Greg: We’ll have you come back another time to talk about the other side of due diligence.

Dan: Sounds good.

Greg: All right, we’ll have you back to cover that. This has been another thought leader production, brought to you by PKF Texas, the Entrepreneur’s Playbook. Tune in next week for another chapter. And remember, if you’re interested in buying or selling companies, give PKF Texas a call.

Note: Running weekly in FromGregsHead.com, PKF Texas – Entrepreneur’s Playbook® is a continuing series of tips brought to you by Greg Price. These run Sunday evenings during the BusinessMakers Radio Show on KPRC 950AM.

Greg: This is PKF Texas and another chapter of The Entrepreneur’s Playbook. I’m Greg Price, director of consulting solutions, and I’m here again with Byron Herbert, the director of our EAS practice at PKF Texas. Byron, welcome back to the playbook.

Bryon: Thank you, Greg.

Greg: So Byron, I’m hearing that there’s a buzz out in the marketplace that companies are out there looking to acquire companies. You’re an advisor to a lot of these middle market companies. What are they telling you?

Bryon: Several of my clients have been approached over the last couple years to sell their business.

Greg: So are they looking to cash out?

Bryon: Well, they’d like to, a lot of them, but it doesn’t always happen the way they hope.

Greg: So why is that?

Bryon: I think in most cases, Greg, they’re just not ready to sell. They haven’t done the due diligence necessary to get their company in a position that the market is looking for.

Greg: Can you share some insight with some of our viewers about what they should be doing?

Bryon: First, Phase 1 would be to get your company profitable and get it efficient. No point in running more sales through an inefficient process. And in that Phase 1 would also be drive your sales. Make sure that you have a steady increase in sales, and there’s a number of things we can do to help you with that. Phase 2 would be to polish the business. Get a management team in place so it’s not completely dependent on the owner. Get some infrastructure in place. Get rid of the debt on your balance sheet. Get your balance sheet cleaned up so it’s attractive to a buyer. And Phase 3 would be to drive the process yourself. There are a number of companies in the marketplace that will help you position your company, go to market with it, and help you drive the value of your company up.

Greg: Byron, I think you put together a white paper that has a lot more detail around this. Is that correct?

Bryon: I have, yes.

Greg: We’ll give the folks a link so they can get to that.

Bryon: Great, thank you.

Greg: We’ll have you back again some time.

Bryon: I appreciate it, Greg.

Greg: This has been another thought leader production brought to you by PKF Texas, The Entrepreneur’s Playbook. Tune in next week for another chapter, and remember, if you’re a seller looking to sell your company, you can get Byron’s white paper at PKFTexas.com/RoutetoProfits/