Due Diligence is a term, usually used in the field of business acquisitions, to refer to the process of finding information about an organization. It includes aspects such as:
- Your area of activity
- The possibilities and future prospects of the business
- The state of its assets and liabilities.
In order to carry out an adequate Due Diligence process, two types of analyzes can be distinguished:
- Economic-Financial Analysis: It is based on a rigorous and detailed purchase review that affects both the financial statements and the valuation of tangible and intangible assets. This comprehensive review also aims to collate and study the feasibility of the business plan developed by the management team. Among the areas that are developed in an economic and financial Due Diligence are: the description of the sector, company description, company strategy, accounting and internal control systems, financial information, financial situation, organization and human resources, as well as environmental factors.
- Legal Analysis: It is based on the review and study of contracts, review of corporate issues and the study of possible litigation. It also includes tax and labor review. Its importance is to avoid hidden commitments or agreements that could endanger the operation.
Due Diligencie Methodology
The methodology used by our firm is based on strategic, operational, economic, legal aspects, among others.
Financial and operational Due Diligence: At this stage, the following aspects must be taken into account:
- Analysis and validation of financial, operational and commercial premises.
- Review of transactions and results of the management.
- Evaluation and identification of opportunities for improvement in business processes.
- Review and application of procedures previously agreed upon in various areas of interest on the target.
1. Structuring: Advice on tax, legal, accounting and environmental aspects, in order to design the optimal structure of the transaction and minimize its risks.
2. Valuation of businesses and assets: It will be analyzed, taking into account the following aspects:
- Valuation of companies, shares, corporate rights, trademarks and intangibles.
- Estimation of Fair Value of assets and liabilities.
- Determination of impairment of assets under local and international regulations.
- Independent view on market value of transactions between related companies.
3. Corporate counseling: The counseling focuses on the following aspects:
- Assistance in the elaboration or evaluation of proposals of buy-sell of companies, options of entrance / exit of the market.
- Evaluation of investment decisions and analysis of operational, financial and market risks.
4. Strategic Solutions: The following should be taken into account:
- Evaluation of the strategic options to increase the creation of economic value.
- Analysis of the cost of capital and its impact on the financing structure.
- Evaluation of synergy in business restructuring processes.
- Evaluations of projects and advice in search of financing.
5. Due Diligencie Inmobiliario: The following aspects must be taken into account:
- Evaluation of technical, legal, tax and financial aspects.
- Review of sale or purchase of real estate assets portfolio.
6. Management and valuation of physical assets: The following should be taken into account:
- Commercial valuations and estimation of replacement values of movable and immovable property.
- Determination of useful lives according to the life cycle of the assets.
- Physical reconciliation of assets and accounting information.
- Valuation under national and international standards.