Due Diligence – What’s it all about?

It is difficult to overstate the importance of the Due Diligence exercise, as failure to conduct an adequate due diligence carries significant risks; while a thorough due diligence offers benefits which could transform the prospects for the business.

So what does it mean?

Due diligence is used to describe the process of investigation into the financial and increasingly, the commercial affairs of a business, conducted by a purchaser as part of a wider investigation embracing all aspects of the target company, prior to acquisition.

What are the benefits?

• Stronger Negotiating Position
• Reduce Risks
• Prepare for Integration

Why warranties are not a substitute for Due Diligence?

Some buyers in a effort to save costs, seek to alleviate transaction risk by substituting warranties and indemnities from the seller, in place of due diligence. As a general rule this approach should not be recommended for the following reasons:

• The buyer is not able to quantify the risk
• Sellers are more co-operative prior to closing
• Warranties and indemnities are often limited as to time/amount
• Seller may not be in a position to pay
• Warranties are often qualified as being “to the best of the seller’s knowledge”

OSK’s financial due diligence provides peace of mind to both corporate and financial buyers by analysing and validating all the financial, commercial, operational and strategic assumptions being made. Call OSK Accountants Dublin today for more.

For further advice on Due Diligence please contact Dylan Byrne on 01 439 4224.