Due Diligence

Due diligence is the term used to describe an investigation used to support the information a purchaser, lender, or investor has been given to make their investment or loan. It can cover a variety of areas, including legal, financial, and commercial.  Typically it will be used in the following circumstances:

  • Financial investment, bank lending, and private equity investment (e.g. when considering funding a management buy-out, 'MBO')
  • Corporate acquisition, where we report to the acquirer's management and, where appropriate, their funders
  • Vendor due diligence – this is commissioned by a vendor, but remains an independent review upon which a purchaser can place legal reliance. It identifies potential issues and reduces the probability of these issues having a negative impact on the value of the business  as they can be addressed by the vendor rather than being a negotiating tool if left to be found by the purchaser.

The scope of due diligence commissioned will always be 'deal' specific, but typically includes:

  • An in-depth analysis of underlying historic performance, cash flow, assets and liabilities
  • A review of management's forecasts, including the working capital requirements of the business
  • A review of the underlying financial systems and controls
  • Taxation matters
  • Staff
  • Key customers and suppliers
  • Commercial terms and other matters relevant to the specific business.

Our report will include a summary of the key issues arising, together with our views on the associated risk and implications for the deal. This will include integration and other post deal issues where appropriate.

Without doubt the success of an acquisition to an acquirer - be it a corporate or financial investor - can be significantly influenced by the extent and quality of due diligence undertaken. Financial and commercial due diligence is a key aspect of the overall investigation into the target. It is therefore vital that whether or not the vendor is producing the due diligence, the information provided to the potential purchaser or investor is presented in a professional manner that can be easily interpreted and that they feel the vendor is being transparent, thus providing additional confidence. Many deals fall over as the purchaser is unable to satisfy themselves of the viability of what they are being told by the vendor, despite a real appetite for the purchase being obvious.  

Contact Us now to see how we can help your business with due diligence requirements.

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