Are You Paying Enough Attention to Due Diligence?

In the lexicon of business, due diligence is a common – and often compulsory – part of mergers and acquisitions (M&A). But leveraging independent expertise could add value to your business transactions.

The old proverb “forewarned is forearmed” might have its beginnings in the 16th century, but it’s a saying that still has influence in the modern world of business.

For business owners, due diligence is an essential part of an M&A process. In its simplest terms, it’s an exercise of reviewing a business holistically, to understand what you’re buying, helping you make an informed decision based on facts and findings: that means uncovering red flags that could literally make-or-break a transaction. But like the saying goes, it’s better to be forewarned.

Due Diligence Services

Commonly, due diligence is a service carried out during a more advanced stage of negotiation in an M&A lifecycle. It’s a process that chiefly focuses on providing assessment of the commercial, financial, tax, human resources, operational and information technology aspects of the business, and calls for advisors like us to review, analyse, interpret and provide an in-depth analysis of the subject business for clients.

Normally the process starts after business owners have assessed and identified potential acquisition or divesture opportunities that are in line with their corporate strategy. Once defined, the process will move into the “execution phase”, where due diligence services will provide vital information to support the decision-making process, such as whether to proceed with the transaction and to help ascertain if other deal related matters should be taken into consideration for the transaction. 

But while due diligence is typically carried out for the purposes of M&A, such as to obtain an initial understanding of the acquisition target and post-acquisition assessment of a business, due diligence can also be useful for a comprehensive evaluation of your existing business (even if it is not for M&A purposes). 

Due diligence can also be undertaken for the purposes of a sale process, when the sellers require support to prepare a preliminary or in-depth diagnosis of the business (more commonly known as “vendor due diligence”).

Creating a Due Diligence Checklist

When it comes to due diligence work, there are general approaches but there is no “one size fits all” solution. The scope of work is crafted to suit the specific needs of the client and the transaction, and is designed to identify risks and issues to assist clients to make informed decisions. 

While it might be tempting for business owners to undertake simplified due diligence, engaging independent experts with specific experience in this area could prove invaluable. Time is often of the essence in any M&A transaction in order to meet the schedule timeline and to identify matters relevant to a transaction, as well as requiring a good grasp of the industry. Our team will ask the right questions and minimise the disruption of daily operations.

We also combine in-depth due diligence experience and expertise in a variety of industries across Asia, from traditional brick and mortar businesses to high-tech companies, enabling us to start the process quickly without going through a significant learning curve whilst helping you get to a decision quicker.

If you need due diligence support, please contact us for a confidential chat.