Conducting Due Diligence: How To Spot Red Flags When Analyzing A Business?

By Jordan

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    SVIC Podcast #4: JP Morgan Sues Frank, How To Spot Deal Due Diligence Red Flags, Trish Higgins

    This interview was on 1 February 2023.

    In this video, we are joined by Trish Higgins, who runs Chenmark Capital. Chenmark acquires and operates small companies. They own an array of businesses from: landscaping, boating tours, fruit tree pruning, food manufacturing, paint distribution, and much more.

    We talked about conducting due diligence on businesses, red flags to be aware of when analyzing a business, dealing with post-close deal surprises, analyzing a company’s culture, how to integrate a small business, and much more.

    Trish writes a free newsletter about business, and you all should subscribe: https://chenmark.com/weekly-thoughts/

     

     

    Episode Notes:

    00:58: Why is JP Morgan Suing Frank
    04:46: How to initiate deal due diligence
    05:40: Making offers with incomplete data
    06:40: Walking away from deals that don’t make sense and avoiding sunk cost fallacy
    07:52: Deal due diligence process
    08:56: Financial due diligence
    12:58: Deal show stoppers
    15:00: Doing the deal is the easy part
    15:55: Founder due diligence
    16:54: Culture due diligence
    23:54: Buying companies people want to work at
    26:31: Transitioning management
    27:52: Simpler the business, the better
    29:36: Training new CEOs
    30:59: Labor shortages and higher interest rates
    32:16: Less debt the better
    32:57 : Tracking consumer spending
    35:00: Starting over again, what would you have done differently?
    37:42: Partnering with family on deals while raising a family
    39:41: Forcing crucial conversations
    42:19: Either company time or raising family time, don’t try to mix the two

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