Use due diligence to investigate your business
If you are planning to buy a company or sign a merger agreement, you will need the comprehensive review of the investee also known as due diligence. What is the meaning of due diligence?
The due diligence purpose is elimination of risks and making sure the company benefit from the cooperation. The principal areas of concern for due diligence are investment, real estate, corporate finance and accounting. But this service has extra value during mergers and acquisitions. The due diligence services carried out to carefully check the legality and financial advantage of the potential agreement or investment project.
The due diligence acquisition checklist provides the business partners with an opportunity to properly evaluate the advantages and disadvantages of the cooperation. The due diligence purpose is the analysis of the current business situation, its development over the past, and the future perspectives to define the possible risks. The absence of due diligence certificate can lead to bad financial results caused by the change of ownership, lawsuits, problems with taxes, and other negative consequences.
When due diligence is highly recommended? First, the procedure is a must before concluding an agreement of investment, acquisition or entering into a partnership with any legal entity. It may also be necessary when providing financing or as a part of an operational risk review. Due diligence requires profound knowledge in the field, experience in audit and expertise in the legislation of the country.
What is the procedure of due diligence?
What is the legal definition of the due diligence? Legal due diligence means thorough examination of a company aimed at assessment of possible business-risks (mostly non-market), for example pending lawsuits or additional staffing costs. Due diligence also verifies facts presented by the other negotiation party. This allows investors or acquisition parties have a clear picture of cooperation advantages and drawbacks and get a deeper understanding of the situation.
The main task of this procedure is to prevent or minimize possible business risks (the scope of due diligence includes economic, legal, tax, marketing, political aspects etc.). Due diligence list for acquisition or buying a business contains key issues and documents for analysis. This is very important, as due diligence report is necessary to prevent the merger or acquisition overpay for shares, financial or real estate losses, debts, seizure of property, securities penalty, administrative or criminal liability, corporate conflicts, loss of intellectual property rights, licenses, and business permissions.
To conduct vendor due diligence properly, it is important to manage the process in a friendly manner. Performing due diligence, some investors can be too suspicious and some company owners can appear too defensive, and the actions of both are the reason for a time-consuming and ineffective procedure.
The expertise of our company specialist helps our company to choose the right attitude to due diligence, keeping it timely and friendly and, at the same time, transparent and effective. This is achieved by using a detailed due diligence checklist and extensive experience of our lawyers. How long does the acquisition due diligence take? Our staff has worked with cases, when well-prepared parties managed to deal with a m&a financial due diligence in a few weeks, but it always depends on the complexity of the case.
The process of due diligence consists of:
- The lawyers ask for the documents they need for analysis and carry out the evaluation of the business. It helps to define the real value of the company depending on its future. Due diligence provides a chance to see the potential perspectives of the company or project.
- So-called “opening the books” – audit of the accounting system and reporting reliability. This step presupposes financial check, examination of the company’s operations, and the research of tax benefits and risks. Such a disclosure in due diligence is usually performed by uploading the documents on a special data storage.
- Legal assessment of risks and the statutory documents analysis. During the due diligence check the specialists review the papers on legal status, corporate management, and the decisions of collegial bodies. Due diligence report format includes the analysis of basic agreements, company’s legitimacy, and labor relationships.
The list of documents required for corporate due diligence procedure may vary depending on the country and field of activity of the company. Competent specialists of our company can offer you full management of due diligence and assist in analysis of opportunities and threats during mergers and acquisitions. We provide our customers with information on due diligence compliance checklist and keep them updated during the process.
How much does due diligence cost? Its value to the company is much more than its price, so this item of expenditure is worth its cost. For sure you want to check an agreement or a company during mergers and acquisitions and need trained specialists to check twice possible risks before you conclude an important agreement, In this case do not hesitate and order due diligence from the “A.T. Consulting”. The company ensures fast and professional work of high quality, special attention to details and informative reports. We will help to define the risks of the potential agreement to prevent any ensuing consequences.