LOOK before you LEAP
When is due diligence needed?
Before buying an established business, it is important that the prospective buyer examines the business in detail. This process is known as due diligence. Due diligence is generally conducted after the buyer and seller have agreed in principle to a deal, however, before signing a binding contract.
Conducting due diligence is the best way to assess the value of a business and the associated risks. For due diligence, seller provides access to important and confidential information about a business for specific time frame. Due diligence is completed in that time frame and all findings are reported to the buyer.
What generally due diligence covers?
Generally, scope of due diligence includes the following:
- Review of financial statements i.e. income statement / profit & loss account, balance sheet, cash flow statement
- Verification and an analysis of accounts receivable and payable
- Verification and review of tax returns including business activity statements
- Review of cash and bank statements and is reconciliations
- Verification and review of bank loans and lines of credit
- Review of minutes of directors’ meetings/management meetings
- Critical review and validation of any seller’s claims about their business
- privacy details (e.g. of employees, trading partners, customers)
- Verification of fixed assets and stock, where applicable
- Review and analysis of working capital management
- Verification of intellectual assets of the business (e.g. intellectual property, trademarks, patents)
- Review of existing contracts with clients/staff
- Review of all agreements
- Review and verification of any contingency and commitments arising out of business operations
- Interview of existing customers and suppliers, where permissible by the seller.
What you will get from due diligence?
From due diligence report, you can assess the business’s financial position and, current and future risk exposure. Due diligence is a process by virtue of which you can obtain answers to questions you may have about the business. It is also an opportunity for the seller to provide answers in a structured format. Good due diligence can become the difference between buying a business that makes or costs you money.
Types of due diligence
Generally there are following types of due diligences:
- Financial due diligence
- Legal due diligence
- Business due diligence
- Operational due diligence
- Human resource due diligence
- Commercial due diligence
So if you looking into investing into an existing business,
you need proper due diligence of that business !
We are helping businesses assess their financial position, and current & future risk exposures.
Let us help you conduct due diligence of your next venture.
Queensland: Brisbane, Cleveland, Logan City, Beenleigh, Gold Coast, Ipswich, Sunshine Coast
New South Wales: Sydney, Paramatta, Bayside Council (Rockdale), Shellharbour