common in the area of investment are the investments in the merger or acquisition of different kinds of businesses or companies.The first priority is an adequate argumentation the effectiveness of this kind of injections, which should be supported by complete, most accurate and totally objective information about the subject of investing.
How to analyze the activities of the company from all sides?Which translation is the term due diligence?
If as a potential object of financing a company, it is required to determine its market position, the state of financial performance, equipment manufacturing facilities and relationships with contractors or partners.For this purpose, perform the procedure due diligence.Translation from English is interpreted as a "due diligence".In Russian is pronounced as "due diligence."This concept is treated differently.Above it was the most frequently used description of the term.
Explanation previously presented concepts
initially is to answer the question: "Due diligence - what is it?"In fact, it is a comprehensive analysis of the firm, in particular the state of its financial affairs and occupied its market position.The information base for the analysis of acts of internal documentation and information received from competitors.
Why is this procedure?
carry out due diligence aims to:
- authentication information about financial and other performance indicators of the company.
- Search substantiated evidence which is to justify the introduction of measures to develop a business plan.
- Evaluation of the possibility of the tactical and strategic goals of the company.
- verify compliance with documentation of legally established rules of its execution, as well as internal standards.
- analysis of the accuracy and timeliness of formation of tax, statistical and other reports.
- definition of competitiveness of the company within its target market segment.
- assess the degree of competence of the management team of the company's ability to implement strategic plans.
All of the above will allow more time to answer the question: "Due diligence - what is it?"The entire list of study feasibility of this analysis is a further confirmation of the need for and relevance of its holding in the Russian companies.
Practical application of the procedure due diligence
There is a list of situations in which a mandatory initial step should be carried out, this method of analysis, namely:
- merger or acquisition of business;
- acquisition of shares or shares of the company;
- the purchase of real estate;
- novoprishedshih institution partners;
- a loan;
- targeted funding, in particular sponsorship or free;
- other operations of financial and commercial orientation in which you need to provide reliable data about the object of the transaction or of the funded company or an investee project investor, sponsor or buyer, and so on. D.
expediency due diligence of companies
Inthe implementation of a comprehensive study of a special project team, which consists of professional lawyers, appraisers, auditors, collects all sorts of information about the analyzed object and checking accounts, especially financial.
There are a few cases that are appropriate for the due diligence.Translation of this term has been considered previously, but it is useful to recall that this comprehensive analysis of the authenticity of the data provided by the company.
Which businesses should definitely apply this study?
to the above facts can be attributed a number of firms requiring due diligence:
- so-called "company for sowing» (Seed).They mainly act as projects and business ideas requiring investments for more in-depth research and development of test units sold.
- newly minted firm (Start up).Attracting investment is necessary for the implementation of research activities and, subsequently, to begin implementation.
- companies at the initial stage (Early stage), that is already present implementation of the test batch of finished product.As a rule, they have no profits and require investment in the final stage of research works.
- Companies settled at the stage of expansion (Expansion).There is a need to attract investment for the development of new markets, increase production, research in the field of marketing, the growth of production capacity and operating units.
- Companies that are in the process of "building bridges» (Bridge financing).It noted the need for funding for the conversion of the legal form, namely private enterprise into an open joint stock company, which is trying to carry out the registration of its shares on the stock exchange.
- Existing firms attract investment for the purchase of ready business managers or existing productions (Management Buy-Out).
- existing companies, whose managers require financing for the purchase of firms by (Management Buy-In).
- firms that are at the stage of the coup (Turnaround).They need investments to strengthen its financial condition.
From these facts it is clear that can give due diligence, that it is in a general sense, and whether it applied to a particular firm.
Species aspect of the procedure
check on the legality of all the founding documents and the correctness of the formation of the authorized capital makes due diligence, the legal aspect of this study which is prevalent.
These include checking the following areas:
- all aspects with regards to the economic aspects of the business sold, or rather, the presence of the corresponding rights.The likelihood of the risks associated with its challenging third parties.
- laws and effective legal reinforcement of transactions within the firm, which was put up for sale.Evaluation of the possibility of occurrence of claims regarding these commercial relations.
- legal side of labor relations with employees, in particular, the correctness of the registration of labor contracts, dismissal procedures and acceptance, distribution of liability, and so on. D. Check for risks of suing employees laid off improperly.
- appropriate action requirements of corporate law firms, namely: the legitimacy of the sale of shares or shares of other commercial entities.Assessment of the admissibility of the claims of shareholders and equity owners regarding the violation of the related transactions.
The profitability of this study is justified?
No less important is the analysis in the framework of the engineering aspect, referred to as technical due diligence.
usefulness of this procedure is supported by the following points:
- owner or investor receives information gained from professional study the technical condition of the audited property, the presence of defects and it is possible to eliminate them or to improve an acceptable state of affairs.This analysis is subject to all the engineering documentation.
- is possible to operate with valid data during the relevant calculations, aimed at the economic feasibility of investments, if necessary, repair or reconstruction of the object.
- All information obtained during the investigation, the information is necessarily useful during negotiations with regards to the price of the object.She will wear a confirmation character, because it is based on a professional expert opinion.
Demand service this study profiling companies
service due diligence will help to get an objective view of the group of experts due to their involvement with the party.This will save money for retraining their employees and avoid bias assessment considered for financial investments of the object.
investor or owner has at its disposal comprehensive information on areas such as accounting, human resources and taxation, as well as legal and corporate expertise.All of this will organize the legal due diligence.
guide the selection of the company, which specializes in carrying out this procedure
The company, which carries out due diligence, must meet the following criteria:
- presence of many years of experience in the relevant field of activity;
- high rating and rave reviews on the previous procedures;
- only highly qualified experts carrying out a comprehensive study;
- opportunity to analyze the specific subject of the investment;
- the principle of efficiency in the research process, achieved by the professionalism of the expert group and standardization procedures of the legal due diligence;
- the close mutual cooperation of all professionals.
there interconnected stages of complex analysis?
This procedure can be divided into three stages:
- Remote request all necessary documentation from the audited company or a direct exit to the analyzed object.In the case of acquisition of shares or shares of a certain company the expert group working on the site.The rationale for this option is the fact that the possibility of prompt settlement of contentious issues identified.
- next stage performs detailed study of the data collected in-house.If you need additional information, they receive from the outside, especially from the state register of legal entities and rights to real estate, or connect licensing authorities.
- At the final stage of the expert group formed a single written report of the asset, which is represented by the section on general information of the company, analyze areas of possible risks and ways of their most effective solutions.
Of the three stages, mentioned earlier, we can formulate a detailed answer to the question: "Due diligence - what is it?"Thus, this procedure will reduce the time to obtain a reasoned response to the expediency of investments in the planned facility.Also, it is able to identify ways to improve both technical and legal, and financial condition of the company.
Due diligence can be described as one of the fundamental stages of the purchase of assets, helps investors to form a complete picture of the risks at the time of appropriation of property and future crises that may occur after the deal.This procedure aims to verify the legitimacy of all activities, as well as the commercial attractiveness of a potential transaction or investment object.
