Preparing to sell your consultancy: creating the data vault
Selling your firm is a project with a series of sub-projects. The biggest of these sub-projects is preparing your financial and operational documents for inspection by potential buyers and ensuring these are easily accessible, secure and well-organized.
Here I have provided a comprehensive check-list of the documents that a buyer will want to see. I have added drop-downs and a dashboard so you can track who is responsible and how complete the different tasks are.
One common mistake I see by sellers is under-estimating the sheer amount of work that this preparation (and the sale more generally) takes. At worst, this can become a distraction from business development and cause buyers to re-evaluate the price they will pay or even pull out all-together.
Usually, sellers use a data vault as the central point for due diligence that a potential buyer will perform. A data vault is important when selling your firm because it securely stores confidential information such as customer data, financial information, and intellectual property. This ensures that sensitive data remains secure throughout the sales process and is not used for any unauthorized purposes.
Having a secure data vault in place also demonstrates to potential buyers that your firm takes data security seriously and is committed to protecting customer data.The data vault is usually a password protected and has a file structure that can be shared with key individuals. Third party data rooms (VDRs) that have additional features (e.g. redaction services; access reporting; automated indexing; watermarking of documents etc). This can be useful as it will give sellers useful information as to which potential buyers have spent how much time looking at which documents!
Each folder of your data-vault should represent the headings of the sheets, unless otherwise instructed. There should be a brief introductory document at the beginning of each folder providing a summary statement, and detailing anything that is missing, and why. Anything unusual should also be pointed out here. The introductory document should also detail the relevant people in that area and provide their contact details. It should be made clear who DOES NOT have knowledge of the sale and should not be contacted.
Where systems are important (e.g. PSA, HCMS, CRM, etc) guest usernames and passwords should be provided in the introductory document with a link to the URL for access. As default, the last 5 years documents should be provided, through buyers and investors will typically focus only on the last three.
Three important final points:
- There should be no surprises. Any ‘bad news’ should have been pre-empted earlier in the Confidential Information Memorandum or the Executive.
- Do not provide access to data room until it is fully populated as this can cause confusion and concern.
- The vault is not everything for due diligence. The buyer will not just rely on information you provide them with but will also speak to employees, check your firm out on GlassDoor and Indeed, cross-check everything with Companies House, and interview the leadership team.
If you would like me to help you grow or sell your consultancy please book a slot here
