Due diligence refers to the care you should take before entering into an agreement or a financial transaction with another party. In a nutshell, it’s an investigation of a potential investment to confirm all facts, such as reviewing all financial records. There are three types of due diligence: commercial, financial, and legal.
Commercial due diligence
This is how you, the buyer, assess the viability of your target purchase and its market position relative to your own. It is designed to ensure that you are buying a company with real value, which will complement and enhance your own business’s growth prospects.
To help you do this, we’ll work closely with your key managers – those responsible for the integration and long-term running of your acquisition.
This is where our years of industry knowledge provides genuine added value. Within Kingston Smith and our extensive network, we have access to expertise in most sectors. When you’re looking for pitfalls, it helps to know what to look for. We certainly do.
Using our unique benchmarking capabilities, we can help identify the areas that require the most scrutiny.
Financial due diligence
Our core business is accounting – pretty handy, we think, for providing comprehensive financial due diligence.
We’ll thoroughly evaluate the seller’s finances. You’ll get reports on its current and historical financial position, as well as a review of future prospects and reliability of financial forecasts.
We can investigate any large liabilities hidden in the accounts. And we’ll have a good look at the overall tax position.
Not least, we can advise you on whether the proposed purchase price is too high and if required, help restructure a deal that suits you better.
Legal due diligence
We can introduce you to lawyers who know the sector. Legal due diligence ensures that the price you pay is ‘fair’ and takes into account any liabilities and potential hidden downsides that might arise after the sale.
However, we won’t leave you to do this on your own. We’ll support you and work alongside the lawyers, not only to structure warranties, but also to help with tax and other potential areas of risk.
Warranties made by the vendor are a key part of any sale agreement. They cover both commercial and tax areas. They alert you to potential risks and allow us to help you manage those risks. Warranties need to be structured and worded carefully to enable you to claim compensation for any loss.
We were very impressed with the professionalism shown by Kingston Smith throughout the due diligence process and the quality of the final report given. The team’s input into the SPA and the general handholding advice provided throughout the process proved invaluable. The team worked tirelessly to ensure our objectives were met and were a pleasure to work with.