Due diligence: financial, legal and tax analysis and consulting
On occasion, before selling and/or acquiring a company or its assets, it is advisable to undertake a process of diagnosis and review a series of points that the buyers will focus on and, if necessary, make the necessary changes to optimize the value and ensure some legal and tax security in the operation.
Some examples of points that should be reviewed before beginning a sales process and before becoming exposed to the market are having exact accounting information and a well-defined organization.
Due diligence is a term that is usually used in relation to business acquisitions to refer to the process of finding information on a company. It includes aspects such as: area of business; future business possibilities and prospects; and the condition of its assets and liabilities. It seeks to obtain all the necessary information to objectively appraise and set the final price of a company acquisition process, the way to structure the transaction and the demand for guarantees or, as the case may be, the advisability of pulling back from the purchase due to the detection of risks or the emergence of new information.
Within this, two types of analyses can be differentiated:
A) Economic-financial analysis: this consists of a rigorous, itemized purchase audit that affects both the financial statements and the valuation of tangible and intangible assets (properties, trademarks, market share, etc.). The purpose of this thorough review is also to cross-check and study the viability of the business plan prepared by the management team. The areas included in economic-financial due diligence include: description of the sector, description of the company, the company strategy, the accounting and internal control systems, financial information, financial position, organization and human resources, as well as environmental factors
B) Legal analysis: the legal part of the due diligence process is based on the review and study of contracts, the review of corporate issues and the study of potential litigation. It also includes a fiscal and labor review. It is important in order to avoid finding hidden commitments or agreements that could endanger the operation.
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