We're about a month into due diligence with a buyer for my HVAC company. Every week they send another data request list. At first it was financials and contracts, now they're asking for things like text message threads between me and our dispatcher, five years of warranty claim emails, and a breakdown of every service call by technician for the past 18 months. I feel like I'm running a second job just responding to these. How do other sellers handle this without killing the deal or losing their minds?
due diligence
How to handle endless data requests during due diligence
Are you working with an M&A advisor or is this direct? That makes a big difference. If you have a banker, they should be filtering these requests and pushing back on the unreasonable ones.
Selling my landscaping business last year I had the same thing. What helped was setting up a shared data room and only answering what was already in there. Anything new had to go through my attorney. Slowed things down a little but stopped the random asks.
Text message threads? That seems excessive. I'd push back on that one specifically.
Honestly a lot of this depends on the buyer. PE firms will ask for everything under the sun because their diligence checklist is standardized. Strategic buyers tend to be more targeted. Who are you dealing with?
Also worth saying, if they're asking for technician-level service call data, they might be trying to model revenue by tech or figure out who the key people are. Nothing wrong with that but you should know why they want it.
This is pretty normal in my experience. The requests slow down once they get into the later stages. The first few weeks are always the worst. Just document your responses and keep a running log so you don't get asked the same thing twice.
lol @ text messages. tell them your phone broke
That's not helpful. OP is trying to close a deal, not joke around.
I'd second the data room suggestion. We used one and it cut down a lot of the back-and-forth. Also make sure your CPA is handling the financial requests directly. No reason you you should be fielding those.
One thing nobody's mentioned: every request you fulfill costs you time and money. If this drags on for months, you're running the business AND doing free consulting for the buyer. At some point you need to have a conversation about exclusivity and a timeline. If they're not willing to commit, the endless requests might be a sign they're just kicking tires
RustyBolt makes a good point. How lpng have they had exclusivity?
Also, are they paying for any of this? When we sold, the buyer covered the cost of our CPA's time for the diligence work. If they're not covering anything, that's worth negotiating.
I'll add one more thing. Keep your responses in writing and don't volunteer information beyond what's asked. I've seen sellers get themselves into trouble by over-explaining or handing over things nobody requested. Answer the question, attach the document, move on.
SparrowHawk how long did the worst part last for you?
One more thought. If the requests keep expanding into operational minutiae, it might be worth asking the buyer directly what decision each request is meant to inform. Sometimes they're just following a checklist and haven't thought about whether they actually need it. A polite question can eliminate a third of the list.