The cost of due diligence
The cost of conducting due diligence depends on the scope and duration of the investigation, which depends largely on the complexity of the target company. The costs associated with due diligence are an easy and reasonable expense compared to the risks associated with not performing due diligence. The parties involved in the transaction will decide who will bear the costs of due diligence, with buyers and sellers typically paying fees to the investment bankers, accountants, lawyers and other advisory teams they employ.
Due Diligence in M&A Transactions
Doing due diligence first requires an exhaustive list of questions. M&A transactions in specific industries may require additional questions, while smaller transactions may require Fewer problems. The following are typical due diligence questions in M&A transactions:
1. Target Company Overview: Understand the company owner’s reasons for selling the business
2. Financials: Examine historical financial statements and related financials Indicators, and future forecasts
3. Technology/Patents: The quality of the company's technology and intellectual property.
4. Strategic fit: How the company fits into the buyer’s organization.
5. Target group: the company’s target consumer group and sales channels.
6. Management/Human Resources: The company’s management, employee base and company structure.
7. Legal issues: pending, threatened or resolved litigation.
8. Information technology: team capabilities, system availability, outsourcing agreement progress and IT department progress.
9. Corporate Affairs: Review organizational documents and company records.
10. Environmental issues: Environmental issues faced by the company and their impact on the company.
11. Production capacity: Review company production-related matters.
12. Marketing strategy: Understand the company's marketing strategy and arrangements.
The above is a brief overview of some of the due diligence questions you may want to answer when performing these common business activities. As with other due diligence cases, always remember to create a list of questions and make sure to include the required experts. Statistics show that transactions that undergo due diligence have a higher chance of success, and due diligence helps improve the quality of information available to decision makers, thereby helping to make informed decisions.
Definition of due diligence_Why is due diligence required in M&A transactions?