What is Vendor Due Diligence?

While in "buy-side due diligence" the buyer is the client of the due diligence(careful analysis and evaluation of companies prior to M&A transactions), in"vendor due diligence" the initiative for the audit comes from the seller. This isless often the case, but also happens.

The vendor due diligence provides the seller with important information: Hecan identify weaknesses in his own company and eliminate them before thepurchase or before a buy-side due diligence. The subsequent examination ofthe object for sale by the buyer therefore has less to worry the seller - he isbetter protected against unpleasant surprises. Vendor Due Diligence alsoreduces the effort for the buyer side, because the seller can provideimportant information in advance - especially if the offer goes to severalbuyers, this procedure simplifies the process.

The analysis effort of vendor due diligence is usually higher than that of buy-side due diligence. This is because the seller has to take into account thedifferent interests of potential buyers. For example, a buyer with long-termand strategic intentions (e.g. a competitor) has different interests from afinancial investor.