Due Dilligence Flashcards
Why due dilligence?
The added value in DD is the ability to provide the client with the tools to better understand the value and risks associated with the transaction
What information is gathered during DD?
Target company, its business, its environment/markets whilst considering the structure of envisaged transaction to ensure the structure of the envisaged transaction
What different types of DD are there? (11)
Financial, tax, legal, commercial, HR, environmental, technical, IT, insurance, integrity and ESG
Is there a right deal size for DD?
Due Diligence can be required independently of the deal value, and size is not always directly proportional with the complexity of the job
What is Buyer DD for?
Identification of deal breakers and critical areas
Identification of opportunities for synergies and post-transaction restructuring
Compliance with accounting policies
Transaction structuring
Negotiation of purchase price
Protection recommendations for buyer / investor in the transaction
What is Vendor DD fot?
Manage the access to information in a competitive process
Ensure confidentiality and minimise the access to the target company
Critical analysis of the consistency of financial and operational information
Identification and timely manage the communication of deal breakers
Credibility of an independent view
Managing a tight schedule
Why is it important to take stakeholders into consideration?
Everyone has an agenda, but the cooperation between stakeholders is key for the success of the Transaction
What are key concerns for PEs? (6)
Fit into investment strategy (ticket size / investment typ / industry)
Exit strategy
IRR
Forecast profitability and CF
Tax structure
Dependence on management
What are key concerns for strategic investors? (5)
Fit into growth strategy
Post-acquisiton synergies
Quality of business / operations
Effective tax rates
Regulatory hurdles
Does the structure of the transaction also impact the DD process?
Yes
What types of access can you have?
May depend on type of transaction
No access, limited and full
Why no access and how is information gathered?
Due to secret process, hostile transaction and / or public company
public info, market intelligence
Why limited access and how is information gathered?
Competitive bid, structured process, process not known by everyone at the target
VDR, IM, management presentation, Q&A VDR, VDD, auditors
Why full access and how is information gathered?
One bidder (or not), everyone knows about the transaction in the target (or not)
Access to headquarters, full access to management, on-site Q&A, auditors
How can DD impact valuation?
Some of the DD’s findings are grey areas to be used as negotiation points for transaction price or on the SPA
