Overview of M&A Due-Diligence Process

Merger and acquisition strategy is an important one for the company’s growth strategy and for making a successful leap in terms of the market presence. The process of merger can prove to be a successful one if the company being taken over is not riddled with risks.

Due diligence is the process through which any prospective buyer of a company can check the financials, contracts and customers of the company to gather in any of the pertinent information regarding the company they want to invest in.

The process of due diligence is committed before the company representatives can give a letter of intent to the company they are going to merge or Acquire.

The M&A activity no matter the size of the transactions or the structures affect the acquiring company, as well as the directors involved significantly and hence the due diligence, is recommended even for a small investment with any company.

How to do Due diligence on Company you are merging with or taking over?

The goal of any due diligence in merger and acquisition is to see that the company has how many loans, problematic contracts, financial investors and intellectual property matters or issues pending for the company.

Given the potential risks involved in the merger and acquisition of the board and the management team of the companies should ensure that they have all the possible information about the company, company financials and the director information.

When is Due diligence needed?

The company that is being merged or being taken over will have to manage both the buyers demand and as well as the value they are ready to pay based on the valuation of the company in the current economy.

So, in order to be prepared for the takeover, the seller must be equipped with the whole processed due diligence report at the time when both the companies sign a letter of intent. The due diligence report of the company will help you understand the charges that are pending upon the company and litigations that are in process.

The due diligence is also needed because the merging company is not always keen on providing negative information about them or the directors, and they always aim at keeping the best foot forward.

Hence, a simple process of due diligence can help you understand whether the company is worth investing into or what exactly is the worth of the company when the deal is being brokered with the management after the Letter of Intent (LOI).

How to Start with Financial Due diligence?

Financial due diligence is performed to review financial accomplishments and verify the accounting process of the company. The accounting process of the company can easily be checked by checking the past 3-year financials filed by them with the MCA.

The components of financial due diligence involve looking into the revenue, maintainable earnings and future cash-flow prospects of the company. The financials of the company also provide an estimate of whether the company is going into the financial “Black Hole” or not.


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