The initial dollar figure presented as a purchase price for a business, whether written on a napkin over coffee or floated in a conversation, is not a binding offer. Any potential acquirer will need to conduct a due diligence investigation before they can enter into a definitive agreement to buy your business. Initial indications can be tactically inflated to ensure the acquirer gains access to your confidential information after which this price is systematically reduced, citing negative findings during due diligence — also known as “The Due Diligence Grind”. The most effective antidotes are preparation and competitive tension. Let’s take a closer look at how a prospective buyer can grind down the purchase price.
The nature of the process changes from proactive to reactive as due diligence progresses. Ultimately, each bidder will have different due diligence requirements and the onus is on the seller to satisfy those requirements (or not). The
Whether you have received a preliminary proposal from a single party who approached you or you’ve received several non-binding bids through a structured
to buy your business. Initial indications can be tactically inflated to ensure the acquirer gains access to your confidential information after which this price is systematically reduced, citing negative findings during due diligence — also known as “
for a business, whether written on a napkin over coffee or floated in a conversation, is not a binding offer. Any potential acquirer will need to conduct a due diligence investigation before they can enter into a
The Due Diligence Grind is often practiced by sophisticated acquirers to reduce the purchase price of a business by citing negative findings during due diligence.
Read full article: The Initial Price May Not Be Real