Mergers, acquisitions and investments which involve large corporate entities usually involve significant sums of money. A thorough process of due diligence is required to ensure that such a large financial commitment is financially sound. The process of due diligence is an investigation into every aspect of a company’s operation, and it can take several months to complete. However, although the process is extremely thorough, it does not need to be feared. A simple due diligence checklist can be used to ensure employees, managers and shareholders know exactly what to expect.
A due diligence checklist will break down the process into five very clear sections: financial, fiscal, organisational, technological and legal. Many companies will appoint a designated due diligence representative who will work as an intermediary between the employees of the company and the agency tasked with the due diligence process.
The process of due diligence enables potential investors to ascertain the risk involved in making an acquisition or investment, so full and unrestrained access to certain documents will be essential. The individuals who gain access to this potentially sensitive information will be agreed on by both parties, and they will usually need to sign contracts of confidentiality. Legal professionals, accountants, marketing experts and industry-insiders will need to be included in the process, as they will be the only people who can truly understand and interpret the relevant information.
A simple due diligence checklist will allow a company and its employees to prepare for the process, so the task of gathering the required information can begin as soon as possible. The type of financial information that will be required will include detailed sales and profit reports for the last three years, financial projections and a full breakdown of the company’s capital structure. Experts in the industry will also need full access to product information which might include patent details, technical specifications and projections for future market share. Marketing experts will need to investigate the company’s current marketing strategies and the current client or customer base. Legal professionals will examine closely any outstanding health and safety liabilities, as well as pending legal actions, copyrights, patents and licences. Typically this procedure requires a secure virtual dataroom where relevant document can be securely accessed 24×7 .
This process will often seem extremely daunting to those who are affected by it. However, a simple due diligence checklist will help a company to be ready, and that should mean there are no nasty surprises in store when the due diligence period finally begins.
More information on mergers, acquisitions, due diligences or post merger acquisitions can be found at http://www.due-diligence-checklist.net . You may also want to download the checklist there.