Financial and accounting due diligence: a prerequisite for M&A transactions

Company acquisitions not only entail opportunities, they can also imply risks for the potential buyer and the seller. Any and all information and being able to judge this competently can ultimately have an impact on the purchase price.

Financial and accounting due diligences help even out the information asymmetry between the buyer and the seller, enabling both parties to have the same information at their fingertips on the target company, and so the price negotiations can genuinely take place between equal parties.

Apart from giving a better understanding of operations at the target company, financial and accounting due diligences help to make more prudent decisions and speed up the decision-making process by identifying, mapping and presenting hidden risks and potentials.

Buy-side due diligence

During a buy-side due diligence the emphasis is placed on analysing the target company’s:

• balance sheet,
• income statement and
• cash-flow statement,

where the main value drivers and cost factors of the target company are identified.

Historical data is presented after adjustments for one-off effects and for any measurement methods that potentially distort the true and fair view. Future plans are examined for authenticity, rationality and internal consistency, while plans are subject to critical analysis.

Sell-side due diligence

As part of conducting a full sell-side due diligence we:

• deliver a data room solution,
• manage the data room,
• represent the seller at management interviews, and
• play an active part in drafting the contract with the help of tax and legal experts.

During a sell-side due diligence the company is presented objectively and realistically, highlighting its positive features and focusing on the potential inherent in the company. We ensure that the materials put together comply with the requirements of the potential investor or investors in terms of content and format, while the professional company presentation strengthens the seller’s bargaining position.

By using our services, the employees of the target company do not have a significantly higher number of tasks to deal with because of the due diligence, so the company’s day-to-day operations can continue over this period without any considerable extra effort.

Advantages of financial and accounting due diligence

As part of our due diligence services we can also:

• assess existing financial processes at companies,
• analyse efficiency,
• optimise current procedures and
• develop new procedures.

With our services you can ensure you comply with the financial components of a buyer audit.

Well-identified risks and shortcomings help to elaborate appropriate strategies, which constitute further added value for the company and can make a substantial contribution to the success of the business.

Other services

Alongside financial and accounting due diligences we also gladly support our clients in managing the entire transaction and we also offer legal and tax due diligences in our service portfolio.

Please feel free to contact us and request a proposal!