Due Diligence in M&A
Legal Due Diligence
Legal Due Diligence has a significant impact on the way a deal or investment proceeds. At the client's request, LLC "EIFOS HUB" specialists will find out whether the transaction target has restrictive and/or breached contracts, past or imminent legal proceedings.
Operational due diligence
Before any merger or acquisition, it is crucial to assess the reputation of the target company. Operational Due Diligence helps to identify strengths and weaknesses in a company's structure and business processes. It helps to determine how outdated production equipment is, whether technology needs to be changed and whether processes need to be optimised.
Legal Due Diligence has a significant impact on the way a deal or investment proceeds. At the client's request, LLC "EIFOS HUB" specialists will find out whether the transaction target has restrictive and/or breached contracts, past or imminent legal proceedings.
- Verification of the company's legal status, statutory documents and registration data.
- Analysis of contracts, licences, permits and litigation.
- Assessing compliance with laws and regulations.
Operational due diligence
Before any merger or acquisition, it is crucial to assess the reputation of the target company. Operational Due Diligence helps to identify strengths and weaknesses in a company's structure and business processes. It helps to determine how outdated production equipment is, whether technology needs to be changed and whether processes need to be optimised.
- Study of business processes, production facilities and technologies.
- Assessment of management efficiency, product and service quality.
- Supply chain and logistics analysis.
Due diligence timeline
The due diligence process can take between 30 and 60 days, although for more complex companies it can take up to 90 days. The timeframe will depend on the size of the company and the type of due diligence required.
For example, if it is a large company with many subsidiaries and a complex asset structure, the process may take longer.
The timeframe also depends on the type of due diligence. Financial due diligence can be completed more quickly if the financial statements are well organised and up to date, whereas legal due diligence requires more time to analyse contracts and court cases. Due diligence also has a significant impact on the timing of the due diligence review if the seller and buyer teams work well together and if the necessary documentation is easily accessible.
The due diligence process can take between 30 and 60 days, although for more complex companies it can take up to 90 days. The timeframe will depend on the size of the company and the type of due diligence required.
For example, if it is a large company with many subsidiaries and a complex asset structure, the process may take longer.
The timeframe also depends on the type of due diligence. Financial due diligence can be completed more quickly if the financial statements are well organised and up to date, whereas legal due diligence requires more time to analyse contracts and court cases. Due diligence also has a significant impact on the timing of the due diligence review if the seller and buyer teams work well together and if the necessary documentation is easily accessible.
Due diligence has long been an integral part of any M&A (mergers and acquisitions) transaction. It is a comprehensive process of reviewing and analysing a business or asset to provide a complete picture of its status, potential and true value.
The reason for 60% of failed deals is insufficient or poor due diligence that fails to identify critical issues. The objective of due diligence is to minimise the potential risks to the investor/owner. Obviously, it is more effective to carry out due diligence before investing. However, if it has not been carried out, it is appropriate to do so at a later stage.
Due diligence and due diligence. What is the difference?
The term 'due diligence' has been used in legal documents since the mid-15th century to refer to cases that need to be investigated with 'due care' or 'special diligence'.
Due diligence is more commonly used as an international generic term to describe a comprehensive analysis and verification of a company or its activities. While due diligence refers to the due diligence process in M&A and investment transactions and involves a structured approach to due diligence aimed at minimising risk.
Financial due diligence
When a transaction is completed, the buyer or investor becomes responsible for any tax issues it inherits. Overstated net operating losses, understated tax liabilities, tax assessment errors or non-payment of tax are the most common M&A risks.
Financial due diligence is the process of verifying the financial performance of a company before entering into a transaction. It involves reviewing financial statements, analysing revenues, expenses, profits and cash flows, and evaluating debt and assets. Particular attention is paid to working capital and costs. They check the quality of net assets and net debt. They make financial projections of expected profits and productivity. It is often at this stage of due diligence that unrecorded liabilities and potential financial risks are identified.
LLC "EIFOS HUB" carries out due diligence and valuation of
The reason for 60% of failed deals is insufficient or poor due diligence that fails to identify critical issues. The objective of due diligence is to minimise the potential risks to the investor/owner. Obviously, it is more effective to carry out due diligence before investing. However, if it has not been carried out, it is appropriate to do so at a later stage.
Due diligence and due diligence. What is the difference?
The term 'due diligence' has been used in legal documents since the mid-15th century to refer to cases that need to be investigated with 'due care' or 'special diligence'.
Due diligence is more commonly used as an international generic term to describe a comprehensive analysis and verification of a company or its activities. While due diligence refers to the due diligence process in M&A and investment transactions and involves a structured approach to due diligence aimed at minimising risk.
Financial due diligence
When a transaction is completed, the buyer or investor becomes responsible for any tax issues it inherits. Overstated net operating losses, understated tax liabilities, tax assessment errors or non-payment of tax are the most common M&A risks.
Financial due diligence is the process of verifying the financial performance of a company before entering into a transaction. It involves reviewing financial statements, analysing revenues, expenses, profits and cash flows, and evaluating debt and assets. Particular attention is paid to working capital and costs. They check the quality of net assets and net debt. They make financial projections of expected profits and productivity. It is often at this stage of due diligence that unrecorded liabilities and potential financial risks are identified.
LLC "EIFOS HUB" carries out due diligence and valuation of
- Annual accounts, tax returns and other financial documents.
- Revenues, expenses, profits, cash flows and debts.
- Analysis of financial forecasts and models.
Soft and hard due diligence
In mergers and acquisitions, it is important to understand not only the financial health of the company, but also how it operates from the inside. There are two types of due diligence used for this purpose, soft due diligence and hard due diligence.
Soft due diligence focuses on people and culture. This approach helps to understand how the employees of the companies will interact after the merger. During the due diligence process, staffing levels, corporate culture, motivation systems and customer feedback are analysed. They also examine social networks to identify informal links with key customers and partners. They conduct anonymous surveys of employees who have left the company. This allows them to assess integration opportunities and identify risks of losing key customers in the event of a change of ownership.
Hard due diligence, on the other hand, is aimed at assessing business indicators. It analyses key performance indicators (KPIs), corporate strategy, intellectual property, financial records, income and expenditure, marketing plans, capital investment and property status. They also review the legal aspects of property ownership, the use of intangible assets and the performance of key contracts. The main objective is to detect fictitious transactions and identify possible tax optimisation schemes.
In mergers and acquisitions, it is important to understand not only the financial health of the company, but also how it operates from the inside. There are two types of due diligence used for this purpose, soft due diligence and hard due diligence.
Soft due diligence focuses on people and culture. This approach helps to understand how the employees of the companies will interact after the merger. During the due diligence process, staffing levels, corporate culture, motivation systems and customer feedback are analysed. They also examine social networks to identify informal links with key customers and partners. They conduct anonymous surveys of employees who have left the company. This allows them to assess integration opportunities and identify risks of losing key customers in the event of a change of ownership.
Hard due diligence, on the other hand, is aimed at assessing business indicators. It analyses key performance indicators (KPIs), corporate strategy, intellectual property, financial records, income and expenditure, marketing plans, capital investment and property status. They also review the legal aspects of property ownership, the use of intangible assets and the performance of key contracts. The main objective is to detect fictitious transactions and identify possible tax optimisation schemes.
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