Being Diligence-Ready vs. Playing Catch-Up
There’s a distinct difference between firms that are diligence ready and open during diligence versus those that are reactive and closed.
Being diligence ready is a little like asking kids to do their homework. They know they should do it, but it can feel like a chore unless there’s a vested interest or passion underneath. Most firms we meet—regardless of size and maturity—don’t have the time or focus to be diligence ready. It often makes more sense to prioritise revenue-generating activities, as these make them more attractive in the first place.
However, watching a management team react and present information off the cuff is quite stressful.
I know which team I’d prefer to be in.
The Best Teams Display These Behaviours:
- A history of documentation: The best teams maintain records consistently, using a “little and often” approach—much like flossing your teeth. This makes it easy to demonstrate historical decision-making.
- Helpful overviews of each folder in the data room: This is management’s opportunity to provide a narrative on each topic, including both highs and lows. Unfortunately, we only see this happen occasionally, but when it does, it makes the job easier for everyone involved.
- A list of 'known, known' issues and challenges: This doesn’t have to be a formal risk register, but they can clearly articulate the realities of their business—its ups and downs—without being caught off guard.
In Contrast, Teams That Struggle:
- Have little to no documentation
- Give erratic narratives about their business and tech
- Discover their own issues during due diligence (One of the most common being single points of failure—we’d really expect you to know and worry about this beforehand.)
The Takeaway: Be Diligence Ready
Don’t wait until an exit or diligence process to get things in order. Instead, take a proactive approach with our Handy Exit Plan, which ensures you’re always diligence ready, reducing stress and increasing your firm's attractiveness to investors and acquirers.