Any company that intends to enter into an important contract, or an investor planning to acquire a business, wants to be completely confident in the profitability and security of the future transaction. This confidence can only be based on reliable and comprehensive information about a potential counterparty. It is for the collection and analysis of such information that a special complete check is carried out, which in world practice is called due diligence (due diligence).
Technical expertise – assessment of the compliance of the property with the available documents (permits, orders, existing BTI plans, etc.), with conclusions about the need to obtain them. The main part of the technical expertise is the conduct of a technical survey (engineering survey) to get information on the state of engineering communications (power supply systems, sewerage systems, water supply systems, fire alarms, fire extinguishing, and other systems), which reflects their availability, current state, and compliance with modern requirements – Inspection of buildings.
A technical inspection of foundations, walls, ceilings, roofs, facades, and other elements of the object is also carried out to obtain information about the service life of the thing during current operation and the need for repair or reconstruction. Then, based on technical expertise, it becomes possible to conclude the market and approximate work cost to bring the object to a liquid state (obtaining permits for reconstruction, reconstruction work, redevelopment, changing the purpose of the thing, and other licenses).
During the due diligence check, a whole range of activities is carried out, including an assessment of the reliability of information about the financial condition of the company, an assessment of the degree of implementation of strategic and current plans, and the effectiveness of the management system, an analysis of the appropriateness of the policy pursued by the company, and the search for competitive advantages.
The due diligence procedure consists of five independent stages, for each of which an objective conclusion is eventually made:
Operational due diligence
His task is to examine the organization’s constituent documents, aimed at identifying the structure of ownership of the company, the scope of the rights of each of the owners, and identifying risks in this area. During operational due diligence, the correctness of registration of the issue of shares and other securities, the principal transactions with them, the completeness of payments to shareholders, and verification of their property and non-property rights are also checked. The result of the stage is an independent report containing a description of potential risks and recommendations for their leveling.
Financial due diligence
At this stage, the main indicators of the company’s financial condition are identified, and their analysis is carried out to assess the prospects for acquiring a business and its further development. To do this, an assessment of the market value is carried out with the help of invited appraisers, the calculation of the company’s financial stability, and the coefficients of its solvency and business activity. In the report on the results of the stage, all coefficients and indicators are given, and the appraiser’s conclusion is given.
- Tax due diligence.
- Legal due diligence.
- Marketing Due Diligence.
The result of the audit is an objective and comprehensive analytical report on the company’s financial, economic, and legal activities with a description of the main business processes and detailed recommendations for their optimization.