by Bill Vinck, Excendio Advisors
Start Early and Build Enterprise Value
Many existing approaches to IT due diligence focus on the administrative areas at the expense of the strategic. Often these approaches begin soon after a deal has been struck. This article suggests a different approach and we call it “preemptive due diligence” (PDD).
What is Preemptive Due Diligence?
PDD refers to a set of tasks that are more strategic than administrative that can begin immediately and will add to the enterprise value of the firm.
Why is PDD useful?
The multiple you may receive for your firm is typically expressed as a range of something such as revenue or adjusted EBITDA. That range is not under your control. Where your firm is in that range, however, is something you can influence. PDD suggests ways for you to do so.
What are some examples?
The goal is always to present your firm in a fashion that supports or augments a buyer’s deal thesis. Progress can be made in these areas independently of the size of the firm.
All firms have customer data. How sophisticated are you in the collection, analysis, and use of that information in the operation of your business?
What customer data do you have and how effective are you at using it?
How easy is it for you to speak to questions of marketing program efficiency?
Can you describe your market share within industry verticals?
Are this quarter’s marketing programs data based?
How deep is your understanding of the depth of the opportunity set represented by each client?
Is AI a component of your CRM environment?
How do you attract, develop, and sustain talent?
What is your firm’s social architecture? Do you measure it?
Is your current talent base a competitive advantage?
How do you deploy talent?
These are only two areas of focus. Of course, there are others.
Pre-emptive Due Diligence urges a seller to focus on these topics early. Progress in these areas can make a firm more attractive to a buyer and that attraction accrues to the benefit of the seller. Why wait?