In order to obtain the best possible basis for decision-making in a transaction, it is necessary to carry out a financial review of the target company. Through in-depth analyses, we identify areas associated with risk and thus contribute to increased insight for our client.
Based on the strategic rationale for a transaction, our advisers will help the client to identify both challenges and opportunities, while making specific recommendations as to how areas of risk may be handled in the best possible way.
Areas typically covered by buy side due diligence:
• Analysis of the development in turnover and operating result
• Assessing the underlying earnings (Quality of Earnings)
• Assumptions related to budgets and forecasts
• Working capital and net debt
• Cash flow and capex requirements
• Related party transactions
• Accounting principles applied and internal control procedures
• Sources and quality of financial information
Vendor assistance services
Change of ownership generates a range of consequences that the vendor may well have neglected to take into account. A well-prepared transaction process can lead to a higher price, a more favorable sales agreement and less disruption to the day-to-day management of the business. If a transaction process is poorly prepared, it is a risk that the purchase price may be reduced during the negotiation phase or – worst case – that the entire transaction process is terminated.
Vendor due diligence provides potential buyers with a thorough understanding of a company’s financial and tax position. This can help increase the number of bidders, which in turn can lead to a higher purchase price and fewer reservations in the purchase agreement.
Prior to a transaction process, BDO provides assistance with carve out or de-merger of business areas, preparation of pro forma accounts and evaluations of issues related to tax and VAT in connection with the sale of whole or parts of a business.
Besides vendor due diligence we typically assist with:
• Structuring of the transaction
• Due diligence readiness
• Data room assistance
• Preparation of data pack and Seller’s Information Document