Isabel Cano He is a lawyer with more than eight years of experience in commercial law. He specializes in mergers and acquisitions, corporate restructuring and corporate law. After developing her career at the international firm RCD and the Madrid firm Ayuela JiménezJoined Devesa & Calvo’s Madrid office, A firm specializing in providing business advocacy advice for the middle market.
The inclusion of Isabel, followed by Javier Belmonte, will allow Devesa & Calvo to continue strengthening its M&A space to undertake the firm’s continued growth and to pursue the firm’s national expansion.
We talked to the lawyer About the advantages carry out a process related to Seller Due Diligence in companies that anticipate an eventual sale in the short to medium term.
The Contingency Due Diligence procedure is the procedure applied by the buyer to the seller to identify possible contingencies and liabilities (financial, legal, tax or labor) in order to decide whether the purchase should be made and, where appropriate, to adjust the purchase price. You can request a price from the seller, determine the limit of liability and/or request a warranty, Seller Due Diligence is performed by the seller himself who anticipates a future sale of his company in the short or medium term.
Therefore, it is an internal analysis process that enables the entrepreneur. Identifying possible hidden liabilities in the company planned to be sold, clearing them in anticipation of the sale, and arranging possible situations that will negatively affect the future transaction. Therefore, thanks to this procedure, the businessman has the opportunity to solve possible problems that may arise during the inspection process of a potential buyer before they arise, as they are corrected in advance.
The advantages are many and varied. First and most relevant, Prevents the buyer from trying to make adjustments to the originally agreed upon price As a result of contingencies identified during the analysis procedure, these contingencies will be pre-warned, corrected and corrected by the company in the Vendor Due Diligence procedure. Therefore this analysis It provides the businessman with security and greater negotiating power within the transaction.
In addition to preventing price adjustments, reduces liability regime will be assumed by the seller after the sale and limits guarantees Avoidance of guarantees, promissory notes, price withholdings, deposits (escrow) or other types of guarantees that will negatively affect the seller for the buyer.
On the other hand it allows speed up the sales process and prevent equipment from clogging Because of the obligation to deal with the buyer during the traditional Due Diligence process, as all the information the buyer will request will be found and organized in advance. In this way, the process of compiling documents and updating the company to be sold can be accomplished over a longer period of time and without the emergencies typical of the merger and acquisition process.
At the same time, by conducting the Seller Due Diligence process Gives the buyer an image of order and professionalism this increases the latter’s confidence in the company and interest in the acquisition, increasing the ultimate probabilities of successful completion of the transaction.
Without prejudice to the above, this preliminary analysis also includes the businessman’s Able to restructure the company before sale To implement a tax-efficient corporate structure that allows taxes to be reduced.
Deadline to conduct Seller Due Diligence will vary depending on the company planned to be sold and the possible need to carry out a restructuring beforehand, but the most advisable would be to carry out this together with: maximum two years’ notice to the company’s estimated sale date, as a longer notice would mean that new contingencies beyond the hidden liabilities identified in Seller Due Diligence may arise in this interim period.
when it comes previous minimum period To do this so that, in the event of a sale, the seller has sufficient time to correct any possible deficiencies noticed, The ideal thing would be to do this at least 6 months before the sale.
Without prejudice to the previous provisions, The Vendor Due Diligence process can be carried out at any time to correct the situation of the company and ensure that the company is free from unexpected events. This transaction can be done not only for the purpose of selling the company, but also for the purpose of regulating possible situations that will negatively affect the company and its partners. Therefore, carrying out this process outside the terms of a possible sale will also allow the businessman and the company to regulate possible tax, labor or corporate liabilities, and will ensure that sales opportunities will increase in the event of a possible tax or business audit. monetary regulation will be eased.
Definitely, Seller Due Diligence by professionals in the field is a highly recommended procedure For all companies that are considering selling their company in the future, because this allows the businessman to be sure that the exit process will result in the success of the operation and businessman gets better sales conditions.