If you are thinking of buying, selling, or merging with another
company, the best way to protect yourself is to do enough "Due
Diligence" to be sure you know what you are getting into.
What is Due Diligence?
Due Diligence is a process to assess the financial and operational
risks inherent in a potential transaction. By reviewing and
verifying a company’s records, you make certain you understand
the real opportunity. Due diligence is nothing more – or less
– than the research you should do before you put your money
down.
Due Diligence answers two questions: Are you fully comfortable
with the business? Are you comfortable with the managers?
Kenton Group has the experience and expertise to answer these
questions and more. After all, how can you tell how much a company
is worth if you can’t examine its’ books and management closely?
The Diligence Process
Due Diligence actually begins after your first meetings with
the target company’s management and a mutual interest is shown.
The first step is to draft a term sheet. The term sheet describes
the kind of agreement you are prepared to make if your Due Diligence
shows that the seller’s representations are accurate.
Drafting a term sheet early is useful to both parties. You
don’t want to undertake a time consuming and expensive review
unless a deal is likely. The seller won’t want to give you access
to internal data without similar guarantees.
When the seller accepts your terms, you draft a letter of intent
and you’re ready for Due Diligence. That is where Kenton Group
comes in. We will:
-
Conduct a data
collection and operational audit. This will provide the preliminary
look at the selling company’s accounting and legal partners,
and an operations audit will assure that the business actually
operates as represented.
-
Organize a "DD
Team", consisting of client personnel, accountant(s),
attorney(s) and Kenton Group members
-
Perform a literature
search to learn as much as possible about the company
-
Gather a list
of prospective questions from the client to ask the company
to be acquired
-
Synthesize the
client’s questions with topics suggested from the literature
search
-
Develop a proposed
collection instrument to delve into most aspects of the target
company’s available information. In addition, a process control
document is needed to track resolution of the requested information
-
Review all questions
and proposed tables with the client and make adjustments
-
Examine the seller’s
business plan
-
Review financial
data, including audited financial statements
-
Thoroughly analyze
the company’s organizational structure from an operational
view, employee training needs, process flows, and customer
service levels
-
Provide a complete
report and recommendation to the client’s top management upon
completion of the process.
We have the Expertise-on-Demand.
Let us put it to work for you!
