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 companys 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 cant examine its books and management closely?
The Diligence Process
Due Diligence actually begins after your first meetings with the target companys 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 sellers representations are accurate.
Drafting a term sheet early is useful to both parties. You dont want to undertake a time consuming and expensive review unless a deal is likely. The seller wont want to give you access to internal data without similar guarantees.
When the seller accepts your terms, you draft a letter of intent and youre 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 companys 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 clients questions with topics suggested from the literature search
- Develop a proposed collection instrument to delve into most aspects of the target companys 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 sellers business plan
- Review financial data, including audited financial statements
- Thoroughly analyze the companys organizational structure from an operational view, employee training needs, process flows, and customer service levels Provide a complete report and recommendation to the clients top management upon completion of the process.
- We have the Expertise-on-Demand. Let us put it to work for you!