Pre-transaction due diligence is the proactive preparation of a business for a transfer of ownership and is a crucial step in protecting the value of your company. The goal of a pre-transaction due diligence review is to identify and fix any perceived problems or issues so they do not affect a future transaction.

Pre-transaction due diligence involves two major types of analysis – a financial audit and a legal audit.

The financial audit involves a third party review of the quality and depth of the financial information that will be presented to a potential buyer, banker or investor. In addition to a pre-transaction financial due diligence, business owners need to conduct top-to-bottom legal due diligence to ensure the legality of the business.

Your advisor group will work together during the pre-transaction due diligence process to assemble a “due diligence chest.” This filing cabinet contains copies of all of the records and documents that a buyer, banker or investor will request when they come in to perform due diligence.