Due Diligence Reviews

Negotiation and due diligence reviews for acquisitions

• Develop a strategy for an acquisition/divestiture. Most of the value unlocked by acquiring a business depends on:
  • the strategy developed for the new business and
  • a detailed implementation plan so that the business does not just “continue as before”
• Strategic acquisitions require a detailed strategy and action plan to be implemented to ensure that the goals set by the target company are met and exceeded
• Busy managers often do not set in place the steps necessary to meet the vision that motivated the CEO to enter into the transaction
• Negotiation of terms of acquisition/divestiture
• A due diligence review is an in depth review of the business of the target company. Some of the benefits of performing a due diligence review are:
• Minimize the risk of unpleasant surprises
• Verify the assets to be acquired
• Establish the liabilities included in the acquisition, especially those that are contingent or difficult to quantify or otherwise not disclosed in the financial statements
• Verify that business is what you were “sold” i.e. search for unexpected and/or undisclosed issues that may affect the business post acquisition
• Although often a due diligence review is done by the acquiring company, there are many other scenarios that require a due diligence review. E.g:
  • Extending a significant loan to a business
  • Entering into a joint venture
  • Entering into a partnership arrangement, whatever the legal structure
• Liaison with lawyers, tax specialists, accountants and other professional advisors
• Post acquisition implementation of strategy
• A comprehensive due diligence review will be based on business expertise supported by a checklist that covers at least the following areas where applicable:
  • Objectives
  • General
  • Financial Statements
  • Financial Forecasts
  • Risk Management & Governance
  • Financing
  • Taxes
  • Human Resources
  • Legal
  • Environmental
  • Competition
  • Sales & Marketing
  • Operations
  • Research & Development & Technology
  • Capital structure