Financial and Tax due diligence on behalf of purchasers
The Mazars due diligence approach focuses on the key risks prevailing in all sale/purchase environments. Our approach includes the following procedures:
- Comprehensive planning/scoping of the assignment at the outset to ensure final due diligence product addresses all areas of concern to the purchaser Identification of specific business, financial and tax issues relevant to target
- Understanding cash conversion ratios/trends
- Detailed review of CAPEX requirements of the business and impact of same on free cash levels
- Identification of key factors impacting on the working capital cycles of the business and detailed review of normalized working capital requirements
- Detailed review of net assets culminating in summary of potential impairments/valuation issues
Identification of potential taxation risks/issues Independent view as to the return/viability of investment
- Identification of specific issues requiring warranties/indemnities Independent assessment of the quality of the management team in place at the target Identification of issues that may cause concern to potential financiers/lending institutions
Vendor initiated financial and tax due diligence reviews
Increasingly vendors are availing of this option due to the inherent advantages that it offers to the transaction process, which include the following:
- It enables potential issues that may impact on the valuation of the business to be identified at an early stage and assessed by the vendor and their transaction team.
- It minimises disruption to the vendor’s business as the due diligence process is undertaken once only.
- It enables all purchasers to receive detailed, relevant and independent information early in the transaction process which results in more informed and realistic bids early in the bidding process.
Typical questions of purchaser and, or financier that are already answered by a Vendor Due Diligence:
- What are the underlying earnings ?
- What are the key drivers of growth / financial performance ?
- What is the current trading performance of the business?
- Are forecasts achievable and what are the key risks and sensitivities?
- Does historical investment (capital expenditure) meet the future needs of the business?
- Are assets materially overstated or liabilities materially understated?
- What are the working capital requirements of the group?
- What are the cash flow characteristics of the group?
- Are the numbers reliable / robust?
- How well controlled is the business?