After a Deal is Sourced, What About Due Diligence?

Alex Karlsen

At CAPTARGET, we’ve spent well over a decade helping buyers big and small to source deals in a cost-effective manner.

Sourcing deals is hard. But it’s not the only piece of the puzzle when it comes to acquiring your next (or first!) portfolio company.

What do you do after sourcing a target, and after signing a letter of intent (LOI)?

Due diligence.

Some firms, often larger ones, have full-on due diligence teams. Yet many that we’ve worked with over the years do not. For those buyers looking for options when entering due diligence, finding a cost-effective proposal from a reputable set of professionals is paramount.

Meet DueDilio, a Due Diligence Platform

DueDilio is a global expert network focused on M&A due diligence. Since launching last year, our team at CAPTARGET has been happy to introduce buyers to their service. 

(They’ve facilitated over 130 projects originating from searchers, independent sponsors, SMBs, intermediaries, and private investors!)

How does it work?

Much like CAPTARGET, DueDilio combines human capital with technology. 

DueDilio connects business buyers, sellers, intermediaries, and private investors with best-in-class, pre-vetted due diligence service providers.  Buyers are able to more easily source, price, and hire a due diligence service provider that fits their unique needs and budget. The whole process can take as little as two business days.    

DueDilio’s wide network of independent professionals, boutique, and mid-size firms specialize in finance, technology, legal, operations, and other areas of business diligence.  

And what’s a typical size range for their clients in the lower-middle market?

Typical clients to date have been pursuing deals in the range of $1M to $25M in transaction value.

Here’s a quick rundown of the process they run…

  1. The process begins with understanding the full scope of the project including timeline, expected deliverables, and budget.  
  2. Next, the buyer is presented with multiple proposals collected from DueDilio’s global network of service providers that are specifically tailored to the project.  
  3. While the buyer reviews the proposals, account managers are always available to assist and answer questions. 
  4. Once chosen, DueDilio connects the client directly with the service provider(s) that fit their needs.    

Here are a few representative projects, as described by DueDilio’s founder, Roman Beylin

Client: Independent Sponsor

Industry:  Offline Service

Project Details: The client was under LOI to acquire an on-location logistics service company moving and monitoring trailers at warehouse locations in the Midwest.  The expected transaction size was around $6M.  They required financial and HR/benefits due diligence.  For financial due diligence, they needed to analyze 3-years of financial statements and produce an unofficial quality of earnings report.  The target company had 18 employees and they needed an HR/benefits consultant to review the employee contracts, benefits, and insurance policies.

Outcome:  DueDilio presented the client with a total of fifteen proposals for their project within three business days.  The proposals came from onshore and offshore service providers.  The median bid for the financial portion of the project came in at $5,000.

Client:  Private Equity Firm

Industry:  Offline Retail

Project Details:

The client was an offshore Private Equity group pursuing their first transaction in the US market.  They were close to signing an LOI to purchase a chain of grocery stores in the Southeast with an expected transaction value of $30M.  They required financial and legal due diligence to support the transaction.  The client was looking for a service provider based in the same state and direct experience with offline retail M&A. 

Outcome:  We presented the client with six proposals within two business days.  The median bid came in at $4,500 for the finance portion of the project.  

Client:  Corporate

Industry:  Software

Project Details: We had a corporate client that is a B2B SaaS and is exploring divesting a part of their business.  They were looking for someone to help them think through the appropriate deal structure and legal considerations of the divestiture.  An ideal candidate would be an independent professional with direct experience in corporate development at a technology business.     

Outcome:  We presented the client with seven proposals within three business days.  Estimated hourly rates came in between $90 and $220.

Client:  Family Office

Industry:  Healthcare

Project Details: Our client was a small Family Office under LOI to acquire a multi-specialty orthopedic practice in the Midwest.  They were looking for a service provider with direct experience within healthcare services to perform full commercial due diligence.  

Outcome: We presented the client with two proposals from our network and three proposals from new service providers we custom sourced specifically for this request. The process took five business days and the average bid came in at $29,000.

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