A comprehensive due diligence is one of the most crucial phases of the acquisition process. Key sectors will be highlighted during the analysis of business risks. The risks with the highest impact on the acquiring company should be the focus of the due diligence.
Together, we define an appropriate scope of due diligence for the transaction and guide your company through the due diligence process to provide you, as the buyer, with sufficient information to:
- Evaluate the financial prospects of the target and determine the accuracy of underlying assumptions.
- Inform management of the inherent risks and opportunities associated with the acquisition.
- Establish a detailed understanding of the operations of the target company to facilitate integration into your organization.
Financial Due Diligence
We conduct a comprehensive review and analysis of financial statements and audit reports to gain a deep understanding of the opportunities and risks that may affect post-acquisition operations when acquiring a company. Our evaluation takes into account the financial situation and operational capabilities of the target company. Risks and identified exposures from the financial audit are carefully analyzed to assess their nature and impact on post-acquisition operations. We also examine the status of corporate taxes and capital gains on disposal.
Key items on the balance sheet are identified, and we ensure that the accounts undergo regular review and documentation to detect potential issues related to pricing and acquisition accounting. Additionally, LJ Advisory reviews the historical revenue and expense data, identifying trends that could impact operations, cash flow, and future profitability. We evaluate the internal control environment, financial systems, and reporting procedures.
Operational Due Diligence
In assessing operational risks and improvement potential after the acquisition, we thoroughly examine the operations and support functions. We verify the reasonableness and consistency of financial forecasts and models with the current operations. Our analysis includes evaluating the effectiveness of business, distribution, and marketing programs, as well as comparing product lines to competitors. We closely monitor productivity and quality levels in production operations. Furthermore, we assess the operational capabilities and value of equipment and infrastructure assets, considering their implications for acquisition accounting and post-acquisition projections.
IT Due Diligence
We thoroughly review the organization of information systems, identifying necessary improvements, pinpointing problem areas, and ensuring the accuracy of depreciation accounting.
Legal Due Diligence
We determine compliance with current laws and regulations.
The buyer’s decision-making process is greatly supported by the findings of our due diligence, as it assists in making the final investment decision, negotiating the acquisition price, ensuring the accuracy of warranties, comprehending all risks and opportunities, and preparing for the integration phase.