No successful transaction without due diligence
This principle certainly applies, as it is the only way to calculate risks and avoid unpleasant surprises when the deal goes through.
Due diligence, literally translated as "due care", is the examination of a target that meets the due diligence standards of the respective jurisdiction. Through a structured due diligence process, the seller creates trust on the buyer's side and thus a higher purchase price potential. Furthermore, it lays the foundations for the seller's release from liability, reduces guarantee commitments in purchase agreements and can better plan for the additional workload for its own employees. It is therefore advisable for sellers to take a proactive approach to due diligence.
At the beginning of every transaction, the general guidelines should first be formulated. Sellers should ask themselves what overarching goals they would like to achieve with the transaction and what concessions they would be prepared to make. Buyers should ask themselves what potential they see in the acquisition of the target and how important the transaction is for their future strategic direction. This is followed by answers to organizational questions about which internal competencies are available, which competencies are to be purchased externally, who will manage internal and external communication and what the decision-making processes should look like.
The scope of due diligence naturally varies depending on the transaction, company size and type of buyer. For large transactions in particular, the disciplines range from tax and legal to finance, pensions and personnel. But even for smaller companies, industry-specific features such as environmental due diligence are necessary, e.g. for a foundry.
Our due diligence checklist provides you with an overview of the key issues and also reveals any special features caused by the COVID-19 pandemic. Due to the high complexity of an M&A transaction, buyers should always engage competent advisors with accompanying specializations in the relevant due diligence areas in addition to the internal interface managers.
Receive a comprehensive checklist for the areas:
- Commercial Due Diligence
- Financial due diligence
- Tax due diligence
- Legal due diligence
- ESG due diligence
- IT / Tech Due Diligence
Read the DealCircle BestPractice Due Diligence Guide here and also receive the free Excel template.
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