Classic transaction support for buyers
We provide support through buy side due diligence in order to:
- identify key value drivers,
- identify risks that could jeopardize transactions,
- design the transaction structure in a targeted manner,
- reduce non-exclusive risks through design measures and
- provide a critical assessment of the assumptions made on future developments.
In the forefront of a due diligence, we advise and define individually with our clients an appropriate scope of the investigation. Based on the findings and in close consultation with clients, the scope of the investigation can be adjusted in order to focus on identified potential issues.
Financial, commercial and tax due diligence investigations are an essential part of our service portfolio.
Financial due diligence - A classic review area for M&A deals
As part of a financial due diligence, we examine the financial opportunities and risks of the target company for and on behalf of the potential buyer.
Financial due diligence is one of the classic areas of examination in an M&A transaction. It is intended to give the prospective buyer an overview of the current and expected financial situation of the target company and thus demonstrates, what sustainable gains can be expected in the future. The analyses of a financial due diligence are essential for decision making in the run-up to a transaction and are therefore critical for the management of a potential buyer in an acquisition. Their results are regularly use to determine the transaction price and to draft a purchase agreement.
In addition to the analysis of corporate assets, the financial and earnings situation is of great importance. The assets, earnings prospects and financing structure are important indicators for the potential buyer to assess whether the transaction is profitable and what purchase price he is willing to pay.
Structure and content of financial due diligence
The structure and content of a due diligence are always customised to the target company. However, the scope of the study usually includes two main objectives:
- One focal point is the analysis of the asset, financial and earnings situation in recent history. The period of time for the analysis generally comprises three to five completed fiscal years and extends into the current fiscal year. In this way, our experts gain an overview of the past risks and existing opportunities, which typically would affect the future.
- Another important issue is not only the consideration of historical figures and financial indicators and their sustainability, but also analyses of earnings prospects and corporate planning.
Scope of analysis prior to an acquisition
As part of the financial due diligence, we conduct a detailed analysis of the external and internal historical financial data and planning calculations of the target company. In addition to the analysis of annual financial statements and supplementary income statements, financial due diligence also includes a look at the market and competitive conditions of the target company, the organizational structure and process organisation as well as the IT equipment of the financial organisation, which are all relevant for a purchase.
On behalf of a potential buyer, we also analyse which risks could reduce future revenues or whether there are unplanned cash outflows. Losses of revenue can be caused, for example, due to reaching the end of the offered product or service’s life cycle as well as by expiring or vulnerable patents. Unplanned outflows of payments can also arise among other things from investment backlogs at the target company, from warranty or guarantee payments.
The economic content of long-term contracts with suppliers or lessors should be considered in this context as well. The actual value of principal assets is also subject to financial due diligence, e.g:
- Does the market value of relevant assets correspond to their carrying amount on the balance sheet or is a corresponding deviation taken into account in the purchase price indication?
- Can foreseeable future revenue risks arising from contractual relationships reduce the value of assets?
We do not conduct a financial due diligence according to the type and scope of an audit of annual financial statements, but rather carry out plausibility analyses of essential information on the one hand and very detailed audits of individual data or facts identified as critical on the other hand.
Commercial due diligence
Analysis of the economic situation of a target company
Commercial due diligence focuses on the sales and procurement markets, the customers and competition of a target company. This includes not only qualitative and quantitative analyses of business plans, but also extensive SWOT analyses of market environment and positioning. This requires sufficient industry and market expertise.
Expertise in selected industries and regions
For selected industries in which AIOS has special expertise, we offer analyses of the business model of potential targets as well as of the market, competition and the resulting opportunities and risks from them.
Our key industries include among others:
- companies in the healthcare sector
- language service providers (especially for technical documentation)
In these industries, our team in transaction consulting has extensive expertise at its disposal, which is also available for initiating transactions.
Tax due diligence
Investigation of the tax risks of a transaction
Tax due diligence is regularly an integral part of the analysis prior to potential acquisitions. It aims to uncover and assess existing tax risks and verify whether sufficient provision has been made in the balance sheet. The main objective of tax due diligence is to determine whether the tax obligations of the target company have been accurately determined and paid in the past and also in this context what risks exist or are threatened.
Recognized and assessed tax risks are either included in the determination of the purchase price or are contractually agreed upon, e.g. trough exclusion clauses, so that as a rule the seller is liable for the inherited tax liabilities.
In addition, tax due diligence can be used to gain insights for a tax-efficient transaction. Thus, following such an investigation, we are in a position to support our clients in establishing a favorable tax structure.
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