Today we are going to tell you why carry out a DUE DILIGENCE , a tool that allows reducing the risk in business transaction, providing the buyer with the greatest possible clarity about the business, allows possible to detect possible hidden liabilities or tax, commercial, labor or environmental contingencies helping the buyer to make the final decision around the company’s purchase operation.
The Due Diligence reduces the risk of the transaction by contributing to the buyer an independent and detailed business evaluation, for this the existence of possible hidden liabilities or contingencies in all areas of study or review is reviewed .
The due diligencie are also carried out to develop a strategy that allows identifying and quantify Business.
After the realization of the due diligence and in the event that hidden liabilities are discovered, both parties must sit down to renegotiate certain aspects related to the transaction. It is highly recommended to make a Due Diligence in any type of sale transaction between companies. It is important to keep in mind that the transaction dimension will determine the scope and duration of the same.
It is also very important to keep in mind that the diligence process varies depending on the type of transaction, the nature of the buyer or the investor and the degree of complexity of the business.
In general, a diligence process studies and draws conclusions on the following areas of the company to acquire:
- the financial and accounting scope.
- market position and commercial aspects.
- the quality and effectiveness of the address.
- technological aspects.
- Fiscal Affairs.
- job matters.
- legal matters.
- environmental matters.
Once the review process is concluded, and as a final result of the Due Diligence process, the advisors prepare a detailed report in which all the reviewed aspects and the conclusions obtained are collected.
The content of this report will depend on the scope of the agreed work but generally follows the following order:
- target summary about the company to be analyzed.
- a commercial review of the company to acquire.
- a review of the company’s industrial and technological aspects.
- a review of the company’s assets and liabilities.
- a review of future forecasts, whether commercial, resource and investment generation.
- information about address and staff.
- an accounting review.
- a fiscal review.
and so far our article on why to carry out a DUE DILIGENCE . If you are thinking about the acquisition of a company and you need a due diligence click