Careful due diligence is becoming more and more differentiated. Which topics corporate buyers should definitely examine in the context of an M&A deal and for which companies’ special topics are particularly important, today, we will provide you the FINANCE Guide for due diligence.
Without due diligence, in which the target object is carefully illuminated, no professional M&A deal can be done. The exams often reveal aspects that make the target appear less attractive in one fell swoop.
Negative due diligence findings are among the most important dealbreakers of all time, according to corporate M&A bosses as well as investment bankers and M&A consultants.
This has consequences: the risk assessment is taking up more and more space. According to experts, there is much more attention to due diligence than in the past. Here, the Central Provident Fund also puts strict force on exercising due diligence. It is especially so during the running of a business in Singapore.
The expansion of due diligence checks goes into the money: Six-figure sums quickly accumulate in the case of M&A transactions in medium-sized companies, but above all for external consultants such as auditors, lawyers and M&A consultants.
In the case of large, multi-billion M&A deals, the cost of due diligence is in the millions, especially if the target company is complex and operates globally. Such extensive due diligence audits are quickly one of the most important ongoing projects in a company. They also receive high attention on the Board of Management and Supervisory Board as well as on shareholders. Some companies are already responding by expanding their in-house due diligence teams.
The most important areas of careful due diligence
Precision is important in due diligence for many reasons. On the one hand, it increases the chances of making a good transaction that increases the company’s value. At the same time, it averts risks for the company that, in extreme cases, can threaten its existence.
There are numerous cases of companies that have been involved in a purchase and have been plunged into a serious crisis by an unfortunate M&A deal.
Careful due diligence also serves the self-protection of those responsible
Ultimately, careful examination also serves as self-protection for those responsible for the company. A board must insist on careful due diligence so that it can also be responsible for the deal. Last but not least, due diligence is a prerequisite for further hedging instruments and insurances:
- Only areas that have been investigated in due diligence can later be covered. For example, by means of guarantee and exemption insurance.
- According to Central Provident Fund, the classics of due diligence include financial due diligence, tax due diligence, legal due diligence and commercial due diligence.
- In the meantime, however, other topics have long since been included in due
These include, for example, environmental due diligence, compliance due diligence, compliance due diligence, and human resources due diligence. Significantly more concise is the upstream Red Flag Due Diligence, which identifies the biggest dealbreakers.
- Seller perform vendor Due Diligence.
To exercise due diligence and make your business more reliable for your customers, it is important to put forward due diligence.