Buying or selling a company or checking its business assets may require the services of a professional firm that has the expertise of investigating the target company. However, investigation is not synonymous to playing detective here. On the contrary, a team of experts bring their skills to the table in order to discover the truth about specific areas of the company. The specific term to be used here is due diligence that may be of multiple types. However, the process that is in high demand can be termed as financial due diligence that can lead to uncovering the business assets of a company, checking its liabilities and business performance. The professional firm undertaking the task would have to provide a detailed report highlighting the findings to the client so that he/ she can take the next step of action based on the facts recovered.
If you are a potential buyer of a company that has been put up for sale or if you are a seller looking to divest your stake, a due diligence would be extremely useful in identifying potential problem areas and solutions. The due diligence firm provides a report containing the facts and figures pertaining to the financial condition of the company for the past few years and an estimate of the future. The client can safely go forward depending on the report thus obtained.
The due diligence report also covers facts that may or may not be disclosed in the formal audit report and financial statements submitted by the company about to be acquired, however. The goal of the due diligence team is to have a potential investor assess the assets along with their valuation in order to make an informed decision.
Most important are the liabilities that the target company keeps concealed from the investors. No buyer would want to bear an unknown and undisclosed financial burden which can come as a surprise a few years after buying the company. It is therefore vital to have a DD done by competent professionals who would be skilled enough to provide a critical analysis of the liabilities and review each of them carefully so that the client is not put at a disadvantage by acquiring or merging with the target company.
Due diligence services include analytical discussion and inquiries with the financial statements being reviewed in detail as well. While the main procedure concentrates mostly on identifying the liabilities and assets, a good due diligence firm would also provide cost-saving advice to their client as well as advice on how to limit liabilities for the future.