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What actually is due diligence? How does it work and how should you if you find yourselves approaching one best prepare for it? Barr Blanton CEO of Crosslake Technologies, whose strapline is “private equity and management teams trusted advisor for technology”, and half of whose business is doing due dil joins us to outline what due diligence is and how to handle it best for both buyer and seller (or in the case of VC raises when raising). Crosslake advise 500 Private Equity firms worldwide and have done an amazing 3,500 due dils in recent years so who better to ask?
Due diligence is a topic that few of you may have come across but it’s an absolutely vital one to know about – not least of which as the most common case is that VCs/PEs funding offers are always dependent on due diligence – rather like your offer to buy a house is conditional on a survey first.
There is a parallel here with another funding phase change stage that of IPOing. As we have heard in prior LFPs on How To IPO unsurprisingly the companies who get themselves in shape well ahead of deciding to IPO fare best. The same applies to due diligence yet the realpolitik is that plenty leave the shall we say “internal tidying up off the office” to roughly the day before the inspector comes round leading to a non-ideal experience.
Topics discussed include:
- Barr’s extensive international business experience
- the Philippines and Manila
- cemeteries as connection to ones ancestors
- Barr’s role as a Partner at McKinsey
- what led him to become CEO at Crosslake
- the mission of trying to be the preeminent advisory team advising tech investors and their management teams
- Crosslake active on six continents with ~300 staff with ~500 Private Equity firms as clients and hundreds of companies within the PE portfolios
- half of the work is one due dil and half on helping management teams drive improvements through technology
- what is due diligence?
- three main aspects – risk/value/compliance
- relationship of buying and selling management teams by the time the due dil commences
- “trying to create a common set of facts”
- focusing the exercises on key issues that are most important to the buyer
- is it not anomalous that if one takes over a public company that there is no due diligence?
- not all due dils are the same
- the competitive aspect of due dil in a competitive situation esp re timeline
- the main five or six workflows within a due dil
- the emerging “product diligence”
- technical due dil
- due dil-ing vast businesses and indeed the need to limit the scope even in a median scale business
- how to design due dil scope/focus and “threshold of pragmatism”
- Crosslake have done ~3,500 due dils in recent years :-!
- managing the whole orchestra of players in eg an M&A situation
- dynamic between say initiating and duel dil teams
- different sequencings of work
- how to make your firm perform well in a due dil – high level recommendations
- “it’s your chance to tell your story”
- products and services that Crosslake provide
- shoutouts for what Crosslake needs more of right now
And much much more 🙂
Share and enjoy!