In an increasingly competitive M&A landscape, thorough preparation is critical to achieving a successful outcome. Vendors who are well-prepared not only enhance buyer confidence but also improve deal efficiency and value realisation.
Two commonly adopted approaches to preparing for a transaction are Vendor Due Diligence (VDD) and Vendor Assistance (VA). While both support vendors through the sale process, they differ in structure, scope, and application.
What is vendor due diligence?
Vendor Due Diligence involves the preparation of a comprehensive, independent report by an external adviser, typically covering financial, tax, or commercial aspects of the business. This report is made available to prospective purchasers as part of the sale process. Once the prospective purchaser becomes an actual purchaser, they will usually be able to place reliance on the VDD report so maintaining independence is crucial for the VDD provider.
The purpose of VDD is to:
- Identify and address key issues in advance of buyer diligence
- Ensure consistency of information across all bidders
- Streamline the transaction process by reducing duplication of work
- Provide independent, high-quality analysis, including opinions for potential buyers
A typical financial VDD report will include analysis of:
- Historical trading performance
- Quality of earnings and EBITDA normalisation
- Working capital requirements
- Cash flow analysis
- Key risks, sensitivities, and value drivers
Vendor due diligence is most commonly utilised in structured or competitive sale processes, particularly for larger or more complex transactions where maximising value and maintaining control of the narrative are key priorities.
What is vendor assistance?
Vendor Assistance provides dedicated, hands-on support to vendors throughout the transaction process, without producing a formal report for third parties. No reliance can be replaced on any VA outputs which is a key distinction between VA and VDD. As a result, the scope and outputs of any VA assignment are completely flexible.
The outputs of the VA will ultimately be the responsibility of management. However, under this approach, advisers will work closely with management to:
- Prepare robust financial information and supporting analysis
- To present management’s view as opposed to the VA providers opinion.
- Support responses to buyer queries and diligence requests
- Identify potential issues and advise on appropriate positioning
- Provide ongoing guidance as the transaction progresses including support through negotiations as there is no requirement to remain independent
This approach is well-suited to:
- Mid-market or smaller transactions
- Bilateral or less competitive sale processes
- Situations where cost efficiency and flexibility are important
- Vendors who wish to retain greater control over external communications
- Transactions where the buyer is likely to be based in the US as they do not usually expect reliance on VDD reports
Vendor Assistance is typically delivered behind the scenes, enabling management to remain fully informed and well-supported without necessarily sharing adviser outputs directly with buyers.
How can Menzies help?
Both Vendor Due Diligence and Vendor Assistance are valuable tools in preparing for a successful transaction. The key is selecting the right approach to align with your deal strategy.
Our Deal Advisory team works closely with vendors to assess their specific circumstances and design a tailored approach whether that’s a full VDD exercise or a hands-on Vendor Assistance assignment.
Ultimately, the better prepared you are, the stronger your position at the negotiating table.
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