Due diligence is the basis for each and every acquisition of a company and the related determination of the corporate value or purchase price. The data of the company to be acquired is thoroughly examined in order to identify potential risks from the transaction. As can be seen in the following chart, this applies not only to the possible financial risks in financial due diligence, but also to the investigation of tax or legal risks and encumbrances in tax due diligence or legal due diligence.
Financial Corporate Analysis with Due Diligence
The time pressure for the analysis of a company prior to an acquisition or a merger is high, as are the expectations for the required due diligence. The financial due diligence includes an assessment of past, effective data, and plan figures such as balance sheet, income statement and cash flows, as well as evaluation of the structure of the personnel, order volume, or the customer base. In this process, the net assets, financial position, and results of operations at a target company are analyzed on the basis of external and internal metrics for the company. However, due diligence must be clearly differentiated from a review such as an audit of the financial statements or a company valuation since due diligence very specifically generates information relevant for the principal.
Objective of Due Diligence for Company Acquisitions
As part of our services, we calculate, for example, normalized earnings, net debt, and identify significant financial risks and impacts on key metrics. Together with our tax and legal partners, we rapidly prepare a report on current questions, potential deal breakers, and recommendations for purchase price clauses or guarantees.
The following input may be relevant for this:
- Sustainable, adjusted earnings
- Sales and earnings growth
- Net debt, including unreported circumstances
- Cash flow planning
- Change in working capital
- Investment activity
The design of the purchase-sale agreement is mainly based on findings and the underlying data from due diligence:
- Separation of the transaction object
- Purchase price formula
- Guarantees and warranties
Buy Side Due Diligence
For buy side due diligence, we help you as the buyer to identify opportunities and risks from the forthcoming transaction and to check certain contractual parameters in a later phase after closing. The focus here is on financial due diligence. However, the analysis and reporting can also be expanded to include tax and legal due diligence, as needed. Our goal is to document the major subjects as part of a red flag report with an experienced team as quickly as possible in order to implement the other, most efficient procedures with you and possibly to perform comprehensive due diligence.
Sell Side Due Diligence
Success always depends on preparation – also or particularly in the case of a corporate sale that requires a certain due diligence duty. Structured and detailed preparatory work as part of a sell side due diligence can allow the sale of a company to take place in a very short time and at the best prices. We provide you with support in the preparation of the sales documents (financial fact book) or also vendor due diligence, and give you in management the necessary overview.
Financial Due Diligence Consulting – a Service Provided by FAS AG
In M&A processes, things move fast! We will discuss the course and scope of the due diligence with you before the project begins and recommend examination areas based on our experience in the sector. While taking account of the client's needs with regard to budget and costs during the transaction, we will develop an individual price offer consisting of a red flag report and full due diligence on the basis of a modular approach.