Due diligence is likely to look a little bit different after COVID-19. You can expect investors and buyers to be very carefulo to conduct adequate due diligence to avoid taking on unexpected risk.
With COVID-19, business travel has been substantially curtailed. Some of that limitation is likely to continue well into the future. Fortunately, a great deal of due diligence is now usually conducted through so-called “Virtual Data Rooms” (that provide buyers and their advisors with controlled access to company documents in a secure cloud environment. A virtual data room is now an absolute necessity.
With less travel and a greater focus on the virtual data room, it is extremely important that sellers provide complete clear information through the virtual data room.
You can also expect some new areas to be a focus of due diligence, such as:
- How well did the company oerform during COVID-19? Was it able to continue operations without significant interuption?
- What lessons have been learned?
- Does the Company have an effective crisis managemkent process?
- Is the Company overly dependent on the owner or one or more other employees for operations?
- Were supplies adequate or did this period expose risks in the supply chain that need to be addressed?
- Did the Company emphasize safety for employees and customers?
- Has the Company complied with givernmental mandates?
- Has the Company used best practices iun cintinuing operations during COVID-19?
- Has the Company taken appropriate advantage of government stimulus measures?
The sale process is likely to be more competitive for sellers. The best prepared sellers will be the most likely to succeed.
We will update this list as thuings evolve.