M & A

Grimes, McGovern & Associates( GMA) CEO and owner John McGovern with some advice for those thinking of taking the dive into the due diligence process, whether buying or selling …

ue Diligence’( DD) – two

The more a seller prepares in advance for the DD portion of the sale, the smoother it will be. We work with event and media business owners to ensure required materials are ready because the paperwork may take more time than one would think.

DD is typically broken up into three parts: Commercial Due Diligence( CDD): CDD includes a detailed history of Key Performance Indicators( KPI) for your show / business, usually at least five years. Examples include revenue breakdowns, numbers of exhibitors and visitors, average spend by attendees, along with customerlevel data including the number of customers in your database( including those that are current and lapsed), demographic data on attendees and customers; and any surveys you might have done.

Don’ t be surprised if the buyers want to speak with a sample of your clients about your events. CDD also includes forecasts for the next several editions and any internal competitive analysis you may have done. Financial Due Diligence( FDD): This is where the buyer delves into the detailed financial records from your events and business. Buyers will review management accounts( profit & loss statements, balance sheets, cash flow), revenue stream breakdowns, accounting policies and more. Essentially, the buyer will thoroughly examine a company’ s financial records, historical and current.

An important concept in FDD is Quality( QoE), which evaluates the accuracy of a company’ s earnings and whether the numbers justify forecasts and valuation. Legal Due Diligence( LDD): This covers topics like corporate structure

Above: John McGovern

and governance, shareholders, customer and vendor contracts, real and intellectual property, regulatory compliance, financial information, tax compliance, data security and privacy. While a lot of LDD consists of making sure legal paperwork is in order, it also uncovers future implications for a buyer. For example, company and deal structure can affect who pays tax and how much. Lawyers for both parties would have to work these issues out before the deal closes.

Due Diligence can be broken down into manageable bites. As detailed in recent Exhibition World e-newsletter articles, making sure that your database is clean and secure, keeping good event and financial records, and knowing the size of your market( TAM, SAM, and SOM) are just part of what you’ ll be asked in the Due Diligence process. An M & A advisor can assist you in this process by advocating on your behalf, managing expectations for both the buyer and seller, and problem solving if any issues come up.

Selling a business is work. Keeping great records helps get you more for the business. EW

n Grimes, McGovern & Associates is a leading lower middle-market Mergers & Acquisitions firm advising media, events, and information services businesses globally.

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