Budget for Financial due diligence for a under 5 million dollar acquisition

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March 14, 2024

by a searcher in Austin, TX, USA

How much do you Budget for Financial due diligence for an under 5 million dollar acquisition?

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Reply by a professional
from Philadelphia University in Toms River, NJ, USA
There are quite a few factors at play when budgeting for this. Is your lender requiring the FDD? They are going to want the preparer to be a reputable firm with experience so that they can rely on it. The quality of the financial information is going to be key as well, but you can help bring the cost down if you are willing to get the financials in a clean and organized state before sending to the FDD professional. I would budget $20k based on the limited information from this post. You may get quotes for much lower than that, but I would advise you proceed with caution. They typically come from CPA shops offering to do FDD that have no experience in it and you may wind up with the financials in a reformatted report with no real value add or insight. A good FDD firm should be your partner throughout the deal and helping you to avoid any potential pitfalls. You get what you pay for. Happy to discuss further if you're interested.
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Reply by a searcher
from University of Victoria in Vancouver, BC, Canada
Happy to give a Canadian perspective.

Legal fees for the deal vary widely by the firm, that will have the largest impact. I budget $20-50k for legal. Some of the national firms could easily rack up $75-125k on even a small deal.

Accounting fees, plan for another $10-25k for a light QoE and diligence. More like $50k including a more fulsome QoE

Lender fees - also varies widely between like $2k-5k for the main banks, up to about 1.5% of debt for lenders like BDC. They will all also have another $5-7k of legal fees that they pass on. So this lender fee can double overall deal costs pretty easily.

So on the light side, I would say $30k all in, more likely would be about $55k and a little more spendy is probably about $75k.
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