When acquiring a company you want to incur as little risk as possible. A due diligence investigation is therefore often conducted. A due diligence investigation is conducted to ascertain the accuracy of the information. It also includes an assessment of the risks and opportunities associated with the target company.
Due diligence is more than an examination of the books
Due diligence is commonly referred to as an examination of the books, but in practice it is much more comprehensive. A due diligence investigation involves not only close scrutiny of the financial past of the potential acquisition candidate or cooperation partner but also an analysis of tax and personal aspects.
Which matters are covered in a due diligence investigation?
- The market position of a company
- Financial performance and developments, opportunities and risks
- Insight into working capital and movements in working capital
- Financial information such as annual reports, debtors and creditors, debts
- Tax position and risks
- Organizational information such as the structure of the organization and personnel rights and contracts
- Treasury and risk management
The results of a due diligence investigation are also valuable during the course of a merger or acquisition. The results give a clearer picture of the risks, the value of the company, the organizational structure and the possible financing of the transaction.
Vendor due diligence
If you want to sell your company, you can conduct a Vendor Due Diligence (VDD) before the sale process. This examines various aspects. A Vendor Due Diligence is efficient and has the advantage for the vendor that a prospective purchaser does not have to be granted exclusivity.