Vendor due diligence is a key step for companies and promoters that are looking to raise funds or undertake a secondary sale, as it streamlines the transaction process in terms of timelines and costs. In this podcast, our principal associate Sourav Nath discusses some of the key benefits of undertaking a vendor due diligence, both from a buyer and seller perspectives.
Transcript – Vendor Diligence
What is the purpose of a Vendor Due Diligence Process?
The purpose of a vendor due diligence process is to evaluate and verify the target company’s financial and legal status, as well as assess any potential risks associated with a potential transaction.
How is a Vendor Diligence different from traditional Legal Due Diligence?
- Vendor due diligence is undertaken by the seller whereas a legal due diligence is undertaken by the buyer;
- Timing of the due diligence;
- The buyer or the investor is able to identify the risk areas and focus on those during the transaction;
- Legal due diligence is more comprehensive.
How is Vendor Diligence helpful for Sellers in M&A and investment transactions?
- Speeds up the process;
- Allows the seller rectify deficiencies in advance;
- Allows the seller/ company to identify consent requirements well ahead of time;
- Provides an improved valuation; and
- Allows company to differentiate their offering from other potential targets of the buyer.
How would such Vendor Diligence help buyers/ investors?
- Provides investors with a crisp snapshot of the company;
- Enables the buyers/ investors to identify and focus on the risk elements quickly;
- Streamlines the process of legal due diligence;
- If required, a top up diligence can be done.
Sourav’s areas of practice include mergers and cross-border acquisitions, investments, joint ventures, spin-offs, asset transfers, business restructuring and general corporate advisory.