What is Vendor Due Diligence (VDD) and why is it important in M&A deals?

While Vendor Due Diligence reports (often encompassing Commercial Due Diligence and Financial Due Diligence) are not critical to a sale process, they can help drive value and create considerable momentum in a sale process – particularly where a highly competitive sale process is anticipated.

While any VDD report will cover the same information as provided for in a more traditional data room, the real added-value is that the provider who prepares the report will also provide an opinion on their findings. A buyer can then rely on this as the process moves forward. This reduces the buyer’s need to carry out any of their own Due Diligence, and can shorten the deal timeframe by many weeks.

A VDD report also facilitates multiple buyers reviewing the same information within a controlled process. Buyers can be asked to re-confirm their offer terms at key milestones, and as their understanding of your business – and the opportunity it presents to them – improves. This exercise prolongs the period where competition prevails, increases the certainty of transacting, and delays the need to grant exclusivity to the ultimate buyer.