Isabel Cano is a lawyer with more than eight years of experience in commercial law. She specializes in mergers and acquisitions, corporate restructuring, and corporate law. After building her career at the international firm RCD and the Madrid firm Ayuela Jiménez, she joined Devesa & Calvo’s Madrid office, a firm focused on delivering business advocacy for the middle market.
The addition of Isabel, followed by Javier Belmonte, will help Devesa & Calvo strengthen its M&A practice as the firm pursues continued growth and national expansion.
The lawyer discussed the advantages of conducting Seller Due Diligence for companies preparing for a potential sale in the short to medium term. Seller Due Diligence is the process used by the buyer to identify contingencies and liabilities—financial, legal, tax, or labor-related—that could influence the decision to buy and, if needed, to adjust the purchase price. The seller, anticipating a future sale, may request price limits, liability caps, or warranties as part of this process.
In practice, Seller Due Diligence is an internal analysis that lets the entrepreneur uncover hidden liabilities in a company slated for sale, address them ahead of the deal, and preempt issues that could derail the transaction. This proactive approach gives the businessperson an opportunity to resolve potential problems before a buyer’s inspection reveals them, reducing surprises later.
The advantages are numerous. First, it prevents the buyer from pressing for price adjustments after contingencies are identified. By pre-warned and corrected issues, the seller gains greater security and leverage in negotiations. Seller Due Diligence helps shield the agreed price from unexpected changes and fosters a smoother transaction.
Additionally, it can modulate the liability regime the seller assumes after the sale and limit guarantees, reducing exposure to guarantees, promissory notes, price withholds, deposits, or other protections that could negatively affect the seller.
Another benefit is speeding up the sales process and avoiding bottlenecks. Since information requested by a buyer is already gathered and organized, document compilation and company updates can proceed over a longer period and without the typical rush of a merger and acquisition timeline. This preparation reassures the buyer that the process is orderly and professional, increasing confidence and interest in the acquisition and improving the odds of a successful closing.
Preliminary analysis also enables the businessperson to restructure the company prior to sale to implement a tax-efficient corporate structure that lowers taxes. The timing for Seller Due Diligence depends on the planned sale date and any required restructuring, but a practical rule is to begin no more than two years before the estimated sale date. Longer notice may bring new contingencies beyond the initially identified liabilities.
Ideally, the process should start at least six months before the sale to ensure any deficiencies are addressed. Nevertheless, Seller Due Diligence can be conducted at any time to align the company’s status with potential sale requirements or to address situations that could negatively affect the business and its partners. Conducting the process outside a sale window can also help resolve tax, labor, or corporate liabilities and make future sales or audits smoother.
In short, Seller Due Diligence conducted by seasoned professionals is highly recommended for companies considering a future sale, as it increases the likelihood of a successful exit and can secure better terms for the seller. [Citation: Devesa & Calvo Abogados]
The article concludes with an invitation to explore further information about the firm and its services in relation to Seller Due Diligence and M&A advisory. [Citation: Devesa & Calvo Abogados]