Due Diligence

Due Diligence is a procedure aimed at an independent and comprehensive evaluation of the investment object. The purpose of this procedure is to detect, avoid and minimize entrepreneurial risks (economic, legal, tax, marketing risks) in the best possible way.

Traditionally Due Diligence is required for:

  • M&A transactions;
  • acquisition of shares and participation shares;
  • acquisition of real estate;
  • joint ventures, partnerships;
  • giving out loans, project finance;
  • other transactions if a buyer, an investor is highly interested in getting confidence in the transparency of the transaction before its execution.

Our highly experienced in the applicable legislation experts who understand the specifics and the peculiarities of Due Diligence are ready to offer you the following types of Due Diligence:

  • Legal Due Diligence
  • Financial Due Diligence
  • Tax Due Diligence
  • Operational Due Diligence
  • Marketing Due Diligence

A Due Diligence team usually consists of financial/accounting and legal experts but it can also include economists, marketing analysts, engineers, environmental experts and others.

Quantitative indicators and financial data as well as qualitative indicators such as evaluation of existing management, internal processes and procedures, the cost of licenses, the place of business and the rights to real estate objects are to be considered for Due Diligence.

All aspects of the company status and the state of business are to be studied. Any information regardless of its source of origin (including, for example, insider information from the employees of the company) is to be analyzed. Firstly, the information is studied by different experts separately and then it is summarized.

Due Diligence is finalized by way of a detailed report (including calculations, analytical charts, sources of information), a brief risk chart with description of the most material ones and the indication of their value as well as with advice on future actions.

Legal Due Diligence

Legal Due Diligence includes:

  • Verification of the validity of founding documents and of the payment of the company charter capital;
  • Analysis of the legal form of the company;
  • Verification of the validity of company management;
  • Evaluation of the validity of appointment and the scope of powers of management bodies (CEO, the board of directors, etc.);
  • Analysis of risks related to antimonopoly regulations;
  • Verification of real estate rights and detection of any encumbrances;
  • Verification of legal basis of holdings in other companies;
  • Assessment of risks of disputes over rights to property;
  • Evaluation of rights and liabilities as part of the business as to their existence and validity;
  • Assessment of risks of disputes over concluded transactions (major transactions and interested-party transactions, absence of powers for execution of documents, etc.);
  • Legal due diligence of licenses and risks of their revocation or suspension;
  • Legal due diligence of company intellectual property objects (patents, trade marks, etc.) and risks of their disputing or cancellation of registration;
  • General assessment of the efficiency of the system of contract work and review of contracts with major counterparties, detection of major legal risks;
  • Analysis of the status and the future prospects of current and contingent court cases.

Financial Due Diligence

As part of the financial Due Diligence our experts shall:

  • Evaluate the efficiency of the quality control system;
  • Evaluate bookkeeping and management accounting status;
  • Evaluate the accuracy of reporting;
  • Analyze the structure of revenues and expenses; analyze fixed assets, financial investments, receivables and payables, inventory stock;
  • Analyze loan agreements and liabilities; analyze contingent liabilities, completeness and accuracy of the accounting of assets and liabilities;
  • Evaluate trends of financial indicators;
  • Take an inventory of the target company assets (property, accounts receivable and payable).

Tax Due Diligence

This procedure includes:

  • Assessment of the overall tax burden and major taxes paid by the company;
  • Assessment of key tax risks;
  • Identification of risks of claims from tax bodies;
  • Determination of risks of the tax optimization schemes used by the company.

Operational Due Diligence

As part of the operational Due Diligence our experts shall:

  • Analyze the history and the prospects of the company development;
  • Analyze efficiency of organizational structure and the level of corporate management;
  • Evaluate the quality of management and the competency of staff;
  • Identify problem areas in management systems;
  • Identify special features in staff relationships.

Marketing Due Diligence

Marketing Due Diligence includes:

  • Evaluation of the current market status of the company;
  • Analysis of competitive environment and identification of competitive advantages;
  • Analysis of major existing and potential clients and partners;
  • Analysis of sales system efficiency;
  • Analysis of the current status of materials and services procurement;
  • Identification of major risks: adverse market tendencies, inefficiencies of the market strategy and procurement policy.

We shall help you to identify, evaluate and minimize risks in relation to purchasing of new businesses, including M&A transactions, as well as to develop an optimal corporate holding structure and management system. We shall enable you to enter into the business you are interested in on most favorable terms or to withdraw from this business; we shall help you to secure your rights of the company participant (a shareholder) in case of insolvency or bankruptcy; we shall help you to protect your rights to key assets.

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