What is Vendor Due Diligence?
In VDD, the seller has an independent due diligence performed by advisors – before buyers start their review. Results are made available to the buyer pool and accelerate the process.
VDD typically covers Financial, Legal and Tax – depending on complexity also Commercial or IT. Advisors work to the same standards as in buyer due diligence.
Benefits for the seller
Transparency reduces buyer uncertainty. Weaknesses are identified early and can be addressed. Negotiations run on valid data – fewer surprises, often better valuations. The sale process becomes more predictable.
A key advantage: the seller learns early where weaknesses lie. He can take measures before the sale process. When buyers then start their review, they encounter a prepared field.
When is VDD worthwhile?
Especially with complex companies, international buyers or multiple bidders, VDD effort is justified. M&A advisors recommend VDD above a certain transaction size.
As a rule of thumb: from transaction values of around €10–15 million, VDD is worthwhile. Costs typically run in the low to mid six figures – often well invested given the upside.