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General Thoughts when you are running a Due Diligence
Large investments, takeovers and mergers involve massive amounts of cash, and buyers need to be absolutely certain that their funds are adequately safeguarded. In the same way as securing a house involves visual, structural and legal verifications, the same is evident when buyers are considering company investments. Every facet of the business – including money matters, legality, fiscal, organisational and scientific research – must be examined in detail, and special arrangements have to be instigated to make sure that the process is completed satisfactorily. A specialist due diligence company may often take control of the entire task on the behalf of a client, or a nominated company spokesperson is occasionally awarded the task of coordinator. There are a few stages in the process, and it is vital that every one of them is attended to comprehensively.
Business Due Diligence
The financial facets of a company’s operation are usually the most important to any investor, but they are also the most complex. Investors will want to obtain evidence of income, company balance sheets, cash-flow reports and other issues that will paint a picture of the a business’s financial situation. It may also be wise to examine forecasts for future business, as they can have a definitive influence on the purchase price. The capital structure of a business includes examining outstanding shares, a complete inventory of shareholders and other ownership-related details.
Organisational Issues During Due Diligence
Of course, at the very heart of any business are the products and services they sell. The due diligence programme will involve a comprehensive deconstruction of every product, its historical data, cost structure, financial viability and many other germane issues. It may also be necessary to gather information on long-term clients, details of such business agreements and their respective sales performance. Any interested party will be eager to know that there is a long-standing and consistent customer base, and that will also entail looking for details of any competitors who could possibly win market share away in the future.
Technological Factors During a Due Diligence
Many organisations rely on their scientific patents and advancements to deliver a viable financial model, so it is essential that this part of the business is looked at carefully. As well as the primary strategy for technology, due diligence investigators will need to know more about leading operatives in scientific study. It will also be a requirement to look into any distant potential technological innovations, the cost of those programmes and the associated time-frames.
The last stages of a due diligence process often involve looking at a business’s legal position. This could involve details of historic legal actions against the company, existing lawsuits, patent issues, copyrights and licences. Once this element of the research has been completed to the satisfaction of all parties, it is either time to talk about the price or pull out of a acceptable deal for good.
Helpful hints for a prospering Due Diligence
There are many things on the Internet that can aid individual professional persons or teams during a Due Diligence assessment. Experts strongly advise using a Due Diligence template as well as using a Web based virtual dataroom when investigating documents.
Re-Edit: Please note also the hint and link to foreign languages due diligence checklists on the right sidebar – thanks to one of our readers.