Scrutinysoft Due Diligence Services

Due Diligence is the research and analysis process that is actually done before an acquisition, investment, business partnership or bank loan takes place in order to determine the value of the business or company of the due diligence or whether there are any major issues or potential issues related to the same. Due diligence is a legal investigation done to confirm that an investment or purchase of a business is beneficial to the buyer. It can be an exhaustive, tedious process with multiple timelines and intricacies, depending on the complexity of the merger or acquisition.

The due diligence is one of the lengthy processes in the Merger and Acquisition deals. The process of due diligence is something which the buyer conducts to confirm the accuracy of the seller’s claims. The due diligence involved in a potential M&A involves several types. They are mentioned below:

• Administrative Due Diligence is the process of due diligence involving the verification of admin-related items such as facilities, occupancy rate, number of workstations, etc. Administrative due diligence is to verify the various facilities owned or occupied by the seller and determine whether all operational costs are captured in the financials or not.

• Financial Due Diligence is an important type of due diligence that seeks the verification of whether the financials showcased in the Confidentiality Information Memorandum (CIM) of the company is accurate or not. The financial due diligence process also involves analysis of major customer accounts, fixed and variable cost analysis, analysis of profit margins, and examination of internal control procedures. Financial DD additionally examines the company’s order book and sales pipeline, in order to create more accurate projections.

• Asset due diligence reports typically include a detailed schedule of fixed assets and their locations, all lease agreements for equipment, a schedule of sales and purchases of major capital equipment during the last three to five years, real estate deeds, mortgages, title policies, and use permits.

• Human resources due diligence involves the analysis of total employees, including current positions, vacancies, due for retirement, and serving the notice period. It also involves the analysis of their current salaries, bonuses paid during the last three years, and years of service.

• Tax Liability Due diligence includes a review of all taxes the company is required to pay and ensuring their proper calculation with no intention of under-reporting of taxes. Documentation of tax compliance and potential issues typically includes verification and review of copies of all tax returns – including income tax, withholding, and sales tax – for the past three to five years along with the Information relating to any past or pending tax audits of the company.

• Intellectual Property Due Diligence is the process of assessing the intellectual property assets of a company. Most companies have intellectual property assets that they can use to monetize their business. These intangible assets are something that differentiates their product and service from their competitors and may often comprise some of the company’s most valuable assets. These include a schedule of patents and patent applications; schedule of copyrights, trademarks, and brand names; Pending patents clearance documents.

• Legal due diligence is, of course, extremely important and typically includes examination and review of copy of memorandum and articles of association; minutes of board meetings for the last three years; minutes of board meetings for the last three years; copy of share certificates issued to Key Management Personnel; copy of all guarantees to which the company is a party; licensing or franchise agreements; copies of all loan agreements, bank financing agreements, and lines of credit to which company is a party.

Scrutinysoft has a dedicated due diligence team that can assist the clients with financial, tax, legal, environmental due diligence and business analysis for organizations that are contemplating investments, strategic partnerships, mergers, and acquisitions.