3 Trends You Will See During Due Diligence

About the Episode

Finding a buyer for your business is only half the battle, and due diligence can feel like a daunting hurdle. This episode explores three major trends you can expect in your due diligence process. You’ll learn how AI is revolutionizing the process, why specialization matters, and how to get ahead of buyers by doing your own sell-side diligence to get a better price and a faster close.

While we might find some deal killers, it’s not as frequent as people might think. Really, diligence is about what the buyer can do with this company if they were to own it.

Jay Lucas

What You’ll Learn

• Due diligence is more specialized than ever: In the past, generalist firms did due diligence. Today, buyers use specialized firms with deep industry knowledge. This trend is driven by competition, and it helps buyers uncover hidden value and gives them a better story to tell sellers who are looking for a knowledgeable partner.
• You can get a better price and a faster close with sell-side diligence: A growing trend is for sellers to perform their own due diligence before going to market. By identifying and proactively addressing potential issues—like a slowdown in a key market or customer concentration risk—you can preempt a buyer’s concerns and speed up the sale process.
• AI is revolutionizing the due diligence process: The first major trend, AI, is dramatically impacting due diligence by providing instant access to data and intelligence. AI can replace many of the time-consuming tasks of junior team members, freeing up senior partners to focus on more complex strategic insights and scenario planning.
• Due diligence is not just for finding deal killers: While a portion of due diligence is dedicated to finding red flags, the bulk of the effort is spent identifying opportunities for a buyer to grow the business. This is why a seller-side due diligence report can be so powerful, as it frames the conversation around growth and opportunity, not just risk.
• All revenue is not the same: Buyers are increasingly focused on the quality of a business’s revenue, especially recurring revenue and strong customer loyalty. They will often analyze a company’s customer retention and Net Promoter Score to assess its long-term growth prospects.

Topics Covered

Want More? Related Resources:

• M&A Due Diligence | Checklist & Overview
• M&A Due Diligence Preparation
• M&A Closing Process | A Complete Guide

Meet Our Guest

Jay Lucas

President of The Lucas Group and LB Equity | New York, New York

Jay is the founder of The Lucas Group, a leading middle-market Private Equity consulting firm specializing in due diligence, and Managing Director of Lucas Brand Equity, a fund focused on wellness. A native of a small New Hampshire town that struggled after the mills closed, Jay is the proud Founder of the American Sunshine Movement that kicked off 7 years ago as he revitalized his hometown of Newport, and is now bringing a positive, can-do spirit into community revitalization across the nation.

LinkedIn: https://www.linkedin.com/in/jay-lucas-7423975/