The cost of an unsuccessful acquisition is high and deal failure can be prevented by proper due diligence processes.
Acquiring or investing into a business usually requires a sizable amount of funds, be it from internal operations or external bank financing. Hence, for the price paid, buyers or investors are expecting to earn good returns and create valuable synergies to boost their existing business operations. It is important to ensure that the target business possesses quality assets, sound structure and strong business drivers, rather than flawed systems, liabilities and a whole host of risks. The cost of an unsuccessful acquisition is high and deal failure can be prevented by proper due diligence processes.
Due diligence gives a realistic picture of how a business is performing now, as well as how it might perform in the future. It surfaces any deal-breakers, issues or problems that might need to be covered in the legal representations and warranties, and prepares the buyer for any post-acquisition integration challenges. Though an overwhelming and time consuming exercise, it is not advisable to ignore a thorough evaluation of the target business.
Where internal resources or expertise are lacking, business owners or private equity investors can engage professional advisers to conduct the due diligence exercise to examine different aspects of the target business and critical elements of the deal before rushing into a decision.
In buyer initiated due diligence, our Transaction Service team conducts a detailed evaluation of the financial information of the target company to identify risks and issues which can affect the deal.
Our financial and tax due diligence service, through a set of customised procedures, is designed to address critical elements, including:
• Evaluating quality and reasonableness of historical and projected earnings and cash flows.
• Assessing quality of assets.
• Identifying any compliance issues and accounting irregularities.
• Identifying hidden costs, commitments and contingencies.
• Identifying and quantifying tax exposures.
• Identifying and quantifying liabilities that can be deal breakers; and
• Highlighting issues likely to affect the purchase price or contract conditions.
In short, the buy-side due diligence aims to support the buyer in gaining a stronger position during the price and contract negotiation stage.
At any stage of your deal and depending on your requirements, our Transaction Service team can provide either limited scope, full scope or pre-closing accounts review.
A sell-side due diligence is a vendor initiated process to evaluate its own financial performance, business strengths and weaknesses, to flag out value-critical issues and deal-breakers. Business owners who are contemplating a disposal of their business or seeking for strategic investors may do well to conduct a thorough evaluation of its business and financial performance. Such due diligence report will be submitted to different potential buyers to initiate a sales discussion.
The due diligence may also be extended to include a preliminary valuation of the business based on either current results or financial projections. This gives business owners a sense of what their company is worth and aid them in their price discussion with potential buyers, who may opt to conduct a full independent valuation as they deem appropriate.
Our sell-side due diligence process offers several benefits, including:
• Opportunity to uncover financial, tax or operational related issues.
• Providing buyers with a transparent, objective and credible view of the business.
• Greater control over the sale process and timing of sale.
• Ability to maximize sales price since value-reducing issues or deal-breakers can be addressed at the early stage.
• Limit disruption to business as potential buyers may not need to perform extensive due diligence; and
• Opportunity to strengthen the financial reporting systems and corporate governance policies and procedures, thus enhancing their overall business attractiveness to potential buyers or investors.
With our due diligence capabilities, Our Transaction Service team complements our M&A Advisory team in facilitating a smooth, efficient and cost effective sell-side transaction process.
Our Transaction Service team has vast experience in due diligence conducted on a wide array of private and public listed businesses, both in Singapore and in the Asia region.
Given the wide spectrum of industry sectors served and global expertise of our international network, our team can draw from the collective experience and knowledge garnered by our practice leaders to address industry-specific risks and opportunities. Our Transaction Service team will also work in cooperation with our tax, M&A and risk management specialists to provide an integrated service and offer guidance in the course of your transaction.
For more information, please contact:
Valuation and Transaction Services
Valuation and Transaction Services