When conducting due diligence on a target business the main goal is to evaluate every detail of its affairs including staff, turnover and if the business has any outstanding debt.
The reason is to allow you to make an informed decision on a potential acquisition. In this article we look at some of things that you should be aware of when conducting business due diligence.
1. Create a Virtual Data Room
There can be a lot to go through when conducting business due diligence and to make it easier and more efficient it is a good idea to view it all via a virtual data room.
Having a virtual data room can be used as a central hub for all the pertinent information that due diligence experts can search, analyse, and evaluate. It can also help to speed up the process, especially if there is a due diligence checklist to run through.
2. Business Structure and Best Practices
Another key area of business due diligence to be aware of is the company’s business structure, processes, and best practices.
This should include names of all the board members, bylaws, minutes of previous meetings as well as shareholder information and company organization chart.
Also, you need to check any recorded history of partnership agreements with suppliers and vendors, it can be good to check the companies press releases and public communication where they have been named.
3. Investigate Business Finances
One of the biggest parts of business due diligence is the company finances and here the accounting expert will want to see a detailed record and all up-to-date finances.
This will include profit and loss statements, tax fillings, annual reports, and accounts payable statements. They will also want to see the business forecasting for performance including projected profit and financial targets.
4. Review Company Assets
Company assets is another area that will require detailed business due diligence which ensures the company can provide evidence that they own their intellectual property.
This part of business due diligence helps to understand the economic value of these assets and that there is no risk of liability of infringement.
Lastly, it is good practice to complete a detailed inventory of the business’s physical assets which might include office equipment and supplies as well as manufacturing or engineering equipment for example.
5. Outstanding Legal Proceedings
Finally, it is important to undertake business due diligence to identify if the company has any ongoing or unresolved legal proceedings that could arise once the acquisition has been completed.
These issues can be with current or past members of staff as well as customers, suppliers, or vendors. Any unresolved lawsuits will often end up being a deal breaker and could be costly to you in the future.
Speak to the experts
To learn more about conducting business due diligence, why not speak to one of our team today? At The Stan Lee we have a fantastic team of expert industry professionals who can help ensure that any business due diligence is done correctly and efficiently. You can email us at firstname.lastname@example.org or call directly on 020 3778 0973.