by Grant Kirby | Feb 27, 2017 | Buying a Business |
Due Diligence Investigations Introduction Investing in a business through a merger or acquisition is an extremely important decision. It is crucial to gain a thorough understanding of the details of the target business so as to make a well-informed decision. The process of gaining a thorough understanding is commonly called a “due diligence” investigation. A due diligence investigation typically considers the financial, tax, legal and operational perspectives of the target. Experts are typically engaged from within the acquiring organisation or from outside. The due diligence reviews are a key stage in the M&A process, and usually take place as soon as the price and key terms of a transaction have been conditionally agreed between the buyer and vendor, but before detailed contracts are negotiated. Due diligence typically takes between 2 weeks and 6 weeks to undertake. Benefits of Due Diligence Investigations Buying a house is reasonably straightforward in that “what you see” is typically “what you get”. The location, design and condition of the house are clear to prospective buyers and there are usually a multitude of comparable houses from which to gauge the likely market value. The nature of a business, on the other hand, is uncertain and what you see is not necessarily what you will get. Like a yacht at sea subjected to wind and waves and various risks, much of which is outside the control of the crew, a business is subject to forces like the market, the actions of competitors, laws and regulations, outside the control of management. The business is also subject to the actions of management, such as the type of product...
by Grant Kirby | Apr 8, 2014 | Buying a Business, Selling a Business |
A key benefit of both the buyer and the seller having their own M&A Advisor (also called Corporate Advisor) is the extra degree of flexibility it provides in resolving differences in the positions between the buyer and seller. For instance, if the buyer and seller come to an impasse, then the advisors would typically discuss between themselves hypothetical solutions that might provide a way forward. These discussions are conducted on the understanding that they are exploratory and do not commit either buyer or seller to the solutions discussed. This then enables the M&A Advisors to be free in proposing solutions and then assessing the pros and cons of each without the fear that they are committing their client in any way. These hypothetical discussions also enable the Advisors to explore their respective client’s responses to the proposed hypothetical solutions and provide a tangible way of the buyer and seller providing detailed feedback on what they do and do not like. This feedback thereby guides the shaping and reshaping of the solutions until an agreed solution is reached. An M&A Advisor will usually not make decisions on behalf of their client, but will negotiate to achieve a result within the authorisations or parameters (e.g. price or terms) provided by their client. Grant Kirby, Director, Cambian Corporate Advisory Pty...
