The prospect of purchasing a commercial company will likely include the process of commercial due diligence. Similar to non-commercial due diligence, it is the process of a thorough vetting of all financial aspects of a company. Typically completed by a Certified Public Accountant (CPA), the commercial due diligence takes into account the complete picture of a company’s standing. Beyond the financials of the company itself, it will also include reports on the building systems such as air conditioning, plumbing, etc, as well as title search, zoning and code requirements. The resulting reports would include information about the associated costs for immediate and future repairs that the company may be required to complete.
Performing commercial due diligence can be done at various stages of a company’s growth. A prospective buyer may be interested in knowing how market uncertainty will affect the value of a company. Aggressive projections that differ from the past tactics may need to be evaluated for feasibility. Discovering the validity of revenue projections that are based on new products or markets is also an important feature of commercial due diligence.
The commercial due diligence can also identify the potential upside of a deal that can affect both the price and the validity of the deal. It can determine the competitive positioning of a company, as well as analyze the risks and opportunities in the market.
Resulting reports from the due diligence can give a company insight into the potential for success as well as the limitations that may occur as a result of the purchase. Due diligence is customized to the specific needs and complexity of both buyer and seller. The process can take anywhere from a few days to several weeks, based on the specific information that a buyer wishes to discover. Often working towards a closing date, the due diligence is performed mainly onsite, where the investigator has access to financials, reports and other needed information to generate an accurate picture.