Due diligence is a form of assurance service undertaken when business acquires another. It is a way of ensuring that you are buying what you think you are buying and has multiple facets: legal, financial, environmental and commercial. We undertake financial and commercial due diligence on behalf of clients as part of our corporate finance offering.
Financial Due Diligence
There is no prescription as to what is involved in financial due diligence. It is similar to an Agreed Procedure Assurance assignment, in that the terms, scale and scope of what is required are agreed between us. Whilst we would always recommend a minimum amount of due diligence, the work is scalable to the size and nature of the acquisition.
In agreeing what work we are to undertake, we will, of course, advise you on the options available and our perception of their relevance to the acquisition in question.
Commercial Due Diligence
In contrast to financial due diligence, which is more concerned with accounting systems and controls, commercial due diligence is concerned with business structures and processes, answering questions like: How is the business organised? Who are the key employees? Who are the major suppliers and customers, and how secure are they? How does the business generate business?
Commercial due diligence is geared not only to understanding what a business is doing and how, but identifying its strengths and weaknesses and the opportunities and threats should you acquire it.
Due diligence enquiries are fundamental to the success of any acquisition, addressing key issues:
- Are you buying what you think you are buying; and
- Can the acquisition leverage my position such that the whole is greater than the sum of its two parts?