Investors, buy business assets fully accepting the maxim of “caveat emptor” or “buyer beware”. Every investor, buyer, whether an M&A (Mergers & Acquisitions) corporation, fund manager, bank or HNW individual needs to reduce the risk of every deal and by commissioning a full Due Diligence report they are going some way toward limiting the exposure that the individual purchase presents.
Effectively Due Diligence puts a potential acquisitions entire commercial footprint under the microscope.
Defined by the Oxford English Dictionary – Due Diligence is a comprehensive appraisal of a business undertaken by a prospective buyer – literally by examining the minutiae of the acquisitions DNA – focussing on the company, assets, reported liabilities, intellectual property, operating and litigation history, and robust background checks of the key management and decision-makers e.g. their track records, competencies, potential conflicts of interest and any political or criminal links.
It is also worth noting that Due Diligence is definitely not a one size fits all process. There are many different facets which can be deployed singularly or collectively depending on the client’s requirements, but the ultimate task of any Due Diligence is to transform assumptions into hard, actionable, facts. With this information, fully collated and cross-referenced the Due Diligence Report will summarise the overall commercial suitability of the acquisition and forward potential to the buyer.
Conducting thorough Due Diligence is critical to any successful acquisition. Without complete and thorough intelligence on the target company, it is impossible to make best-informed decisions on any potential business purchase or investment.
Due Diligence can also be the reasonable steps taken by a person to avoid committing a tort, breaching KYC (Know Your Client) protocols or other potential criminal offence.
Pre-Transactional Due Diligence Today, major transactions are increasingly multifaceted. Whether you’re buying another company, selling off a division of your company or partnering with a new alliance, real deal value can often be blurry, at best. That is why it is essential and moreover, common practice for buyers more than sellers to retain a Professional Due Diligence Partner.
Seller-side Due Diligence really just entails the seller providing information on their company’s projections, its competitors and relevant, current economic factors ensuring that the information being relayed to the potential purchaser is honest, accurate and true. In some situations, for example IPOs (Initial Public Offering), Seller-side Due Diligence can also be deployed to research potential buyers.
If you are selling your business whether in part or whole, as long as the appropriate KYC protocols have been observed and unless there is a strong ethical objection – then generally most business owners don’t really care who the buyer is as long as they have the required funds to close the deal; and a simple “proof of funds” document from the investors bankers will normally satisfy that requirement.
Of course in the M&A industry, the rapid assessment of Assets/Liabilities is literally bread and butter to the world’s leading banks and financial institutions. They have their own compliance departments whose sole role in life is to continually conduct due diligence, manage their KYC protocols and ultimately, again, reduce the risk/exposure that the individual transaction or client presents.
Instructing a Due Diligence Report, however, is no guarantee as to the performance of the deal in hand and in fact a significant number of business acquisitions fail to meet the expectations of the buyer, simply because of the outcome of the intelligence gathered by the Corporate Intelligence Specialist.
Enhanced Due Diligence Where substantial transaction monies or say a leading Brand are involved the tasking of Due Diligence elevates to Enhanced Due Diligence also known as Advanced Due Diligence and generally this work falls to Corporate Intelligence firms who are experienced in multi-disciplined tasking obviating the need for additional contract Lawyers, Accountants or Management Consultants.
Enhanced Due Diligence takes the process to a much higher level of scrutiny necessitating the deployment of all actionable assets including individual in-depth intelligence including:
Other forms of Enhanced Due Diligence enquiries also include IT (Information Technology) networks, issues of stocks and/or bonds, R&D (Research and Development), and sales and marketing reporting.
Matrix Intelligence Matrix Intelligence are a leading Corporate Intelligence firm who have substantial expertise across a wide-variety of disciplines but specialising in Enhanced Due Diligence, Asset Tracing & Recovery, Complex Investigations and Litigation Support for lawyers, financial firms, corporate clients, third party funders and HNW individuals – worldwide.
Having expended substantial time and resources Matrix Intelligence have developed an exacting schedule of proprietary Enhanced Due Diligence protocols.
Whether you require Pre-Transactional or Seller-side Enhanced Due Diligence, Matrix Intelligence can deliver advanced forensic reporting and comprehensive support data that can make the difference between a successful and smooth business transaction and a costly failure.
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