6 March 2019
The onus is on the buyer
Buyer beware (caveat emptor) is a principle that places the onus on the buyer to perform due diligence before making an investment. The expectation is that the buyer has access to all the information they need to make a reasonably informed decision, but in practice, the level and access to information can vary dramatically.
This can be due to the business in question being owner managed without the financial controls you expect in larger companies or due to a tightly managed bidding process with strong control over the timing and access to information.
Why is financial due diligence so important?
Financial due diligence exercise is a very important part of an investment process, not just for an acquisition, but also for fundraising opportunities or listings. It gives the investor increased comfort around risks, and for an acquisition can provide comfort on potential cost synergies as well as contributes towards post-deal integration planning and strategy.
High-level versus full due diligence
However, there is always a tension between completing full due diligence versus a high level limited due diligence exercise depending on the stage you are at. A limited financial diligence is sufficient to get you through the first or second round of a competitive bidding process, or as a first review to make a decision on whether the acquisition opportunity is still of interest before moving forward to a more detailed review.
Some acquisitions can be simple businesses and the diligence is straight forward or a bolt-on to an existing business and thus the acquirer is comfortable with a high-level review and prefers to focus on what they consider are the key risk areas from making similar acquisitions.
We can help
UHY Hacker Young understands these needs and provides a flexible approach to due diligence tailoring the work to suit the situation and client need, whether for an acquisition, flotation, vendor due diligence or reporting accountant work.
We work to identify areas of concern early and work with clients to flush these out to provide what they need to resolve concerns and deliver the deal or whether to walk away. We are partner-led and can call on our Tax, VAT and sector specialists, as well as our national and international network.
Should you require Financial Due Diligence and want a cost-effective, tailored approach please do not hesitate to contact me or visit our Corporate Finance page.
Alternatively, contact your usual UHY adviser or fill out our contact form.
