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Take Five #083: Due diligence checklist for Notion, with template and brief explainer video, and more

1. Separating truths and lies during the due diligence process

Our experience is that the vast majority of people that we work with fall closer to the innocent mistake end of the spectrum than the malicious and/or fraudulent misrepresentation end. Most of the time, most missing documentation is missing because a seller simply didn’t know we really meant “all” or didn’t fully understand what we were asking for.

But, people do try to gussy up the numbers sometimes. And the intent and nature of that extra shine can make all the difference. And, here’s the other thing about misrepresentation: Once somebody’s caught in one lie (or half truth, or suspected omission, or gussying up of information) everything else becomes… a little more suspect.

Let’s start with the basics. A misrepresentation is a false statement of a material fact made by a party that then affects the other party’s decision in agreeing to a contract. There are three overarching types of misrepresentation:

1. Innocent misrepresentation: You make a statement of fact that is untrue, but you’re unaware that it’s untrue.
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2.Negligent misrepresentation: You’re violating the idea of “reasonable care” by not trying to verify if a statement is true before executing a contract.
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3. Fraudulent misrepresentation: You knowingly or recklessly make a false statement.

Find the rest of Permanent Equity’s article here.

2. Breakdown of how to quickly analyze an income statement

3. Deep-dive into Socratic management strategies

4. Due diligence checklist for Notion, with template and brief explainer video

5. Why research is probably the most important part of ETA

Lots of deals look like one thing on the surface but are in fact quite another once you start to dig into the financials.  Most people try to portray an accurate picture of what they are selling but some people can get a little squirrely with the numbers.  The time to find this out is before the deal is done, not after.  

You would be surprised at how many people buy businesses with very little or no research.  This is a huge, but very preventable mistake.  The number one risk is not doing enough due diligence on every deal.  Yes, I know it can be tiring.  Especially if you had a few opportunities fall through but take it from a former Army intelligence officer, information is your friend.  It prevents you from making a rash decision, or getting carried away by emotions like “I’m about to close my first deal!”.  It is best to examine the situation through all moods and leave no stone unturned.  

Beyond the obvious advantages of making sure there aren’t any red flags, research also increases the likelihood of closing the deal even if you know the P&Ls are squeaky clean from the beginning.

Read the complete Acquisition Ace post here.

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