Performing a thorough due diligence on a potential acquisition is one of the most important tasks that a buyer needs to do when making a purchase decision. We’ve put together a list of items that buyers will want to investigate when talking to a seller.
This is part of a large series. Be sure to scan our Buyers Blog for the category Due Diligence.
The next step in the Sales and Marketing portion of your Due Diligence is Marketing and Distribution. The purpose of this section is to understand the portion of business that might be dependent on certain partnerships and marketing efforts.
– Evaluate the importance of original equipment manufacturers (OEMs), present and future.
– Analyze each significant contract regarding contingencies, extent of warranties and other service obligations, rights of cancellation, etc.
– Check material contracts with customers for completeness, to determine existence of side written or oral commitments, or other terms that materially vary Business contracts.
– Evaluate the extent to which the Company finances any customer purchases from the Business and obtain a copy of documentation.
– Review model sales contract, sales representative agreements and dealer agreements used by the Business.
– Evaluate the adequacy of the distribution network, the degree of control over distribution, etc.
– Evaluate the effectiveness of marketing personnel.
– For new products, estimate the cost of introduction, and determine whether the cost is adequately reflected in cash flow projections.
– Assess the likelihood of discontinuation of products or services.
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