What Are Best Practices For Managing A Due Diligence Process-mycoolboy

UnCategorized A family-owned business received an unsolicited letter of intent to purchase the company. The Board is split on sale of the company, but has agreed to allow due diligence. Only a few key employees are aware of the LOI. What are best practices for managing a due diligence process? Advice from a group of CEOs: A due diligence process can be a major distraction. Put as short a fuse as you can on the due diligence process; insist that the information requested be limited in scope to essential materials to minimize distraction; and that the process not interfere with scheduled company commitments. It is difficult to hide reality from the troops. Good due diligence is incompatible with secrecy. Further, it is risky to misrepresent the situation to staff and can compromise management credibility. Absent communication about the situation, if rumors develop at least a segment of employees will assume the worst leading to possible employee loss and erosion of leadership credibility. Assume that bright people will figure out what is going on. However, they may not tell you what they know or suspect. It is less risky to explain the situation and take the opportunity to put it in the best light. At this point, you are already behind the story. It is very important that you get out in front of the story and take control of the message. Points may include: *The company is not for sale but has received an unsolicited inquiry. *This is happening because the company is successful, is producing consistent value, and others in the market appreciate our success. *As a privately-held company, it is in the interest of the owners to understand what value the company could have in a sale. *Whatever happens, the company will continue as a going concern and if the company is sold, all efforts will be made to assure the retention and security of the employees. Ideally, let staff know about the situation through a company-wide announcement, with video link to remote sites, and with the opportunity for employees to ask questions. Brief all key managers in advance, with Q&A scripts to deliver a consistent message and address individual questions. As necessary, translators should be available to assure that employees not fluent in English also understand the message. It is important to involve lower level managers of important departments in planning and execution of the announcement. Strictly control the due diligence process. Companies have been known to feign a due diligence in order to obtain competitive information or to steal key employees. Restrict direct contact with employees and, to the extent possible, with key customers. Maintain your focus on the business – there is no guarantee of a sale. Put retention packages in place for all key employees. If the process yields no sale you may well receive other unsolicited offers. Use the current situation to develop more open communication with employees. Share both key results and prospects for the company at regular intervals. Let employees know how their efforts are building the company. Celebrate success with them and give them credit. Assure them that you are keeping their best interest in mind. Keep your messages motivational. Continually seek input on messaging from your managers and key staff. If the deal does not go through, assume that it will negatively impact company results for at least one quarter. This is inevitable due to the distraction accompanying due diligence. Adjust your forecasts and incentive programs accordingly. About the Author: Sandy McMahon is publisher of Ceo2Ceos (.Ceo2Ceos..), a non-.mercial site for executives to share best practices. He is also President of Executive Forums of Silicon Valley. With over 20 years of executive experience, Sandy has a BA from Brown, an EdM from Harvard, and an MBA from Duke. Article Published On: 相关的主题文章: