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M&A and Due Diligence tools for a successful deal close

Due Diligence in M&A deals generates a large array of reliable information about the activities of companies, which allows to objectively determine the value of the target company.

Efficiencies of M&A deals in the modern economy

Modern trends in the world economy are dominated by globalization, characterized by various changes, including the increase in the average size of corporations, as well as the creation of intersectoral structures, the transformation of ownership, and an increase in the scale of their activities. The most common tool of competition is the mergers and acquisitions (M&A) of competing companies.

There are certain reasons for M&A deals:

  • the strategy of future development; strengthening and strengthening market positions;
  • the desire of some enterprises to survive in conditions of increased competition;
  • problems related to the global economic crisis;
  • desire to restructure the business due to insolvency;
  • debt restructuring;
  • optimization of corporate structural groups of enterprises;
  • lack of access to borrowed resources (loans);
  • the rapid depreciation of assets due to financial instability.

In the M&A process for both the buyer and the seller of the business, the following aspects are important: audit of financial statements, legal audit, environmental, organizational, personnel, technological, and technical audit.

The purpose of the Due Diligence procedure

Due Diligence is an integral part of the process of mergers and acquisitions, as it generates a large array of reliable information about the activities of companies, which allows you to objectively determine the value of the company. Due Diligence should be understood as a comprehensive in-depth inspection of the company’s activities, including its financial condition, solvency, management system, reporting, development potential, and strength of influence on the operating environment, commissioned by the company or one of the members of the negotiation process.

Due diligence is carried out in several directions. The most common among them are:

  • commercial expertise – assessment of marketing and production potential, the competitiveness of the company and its products, the level of demand for products, technological level of development and business model of the company;
  • financial expertise – a detailed analysis of the tax and financial condition of the company, internal audit policy;
  • legal examination – analysis of compliance of constituent documents, licenses, and agreements with current legislation to prevent risks in the process of agreeing on the M&A deals.

In the process of preparation for integration with the help of Due diligence the strategic verification (analysis of compliance and the possibility of unification of strategic goals and development plans of companies), and operating (analysis of the financial condition, corporate governance system, enterprise structure, tangible and intangible assets, logistics and sales channels, accounting, etc) are carried out.

Besides, the outlined tasks are fully implemented by Virtual Data Rooms, the purpose of which is the organization of secure internal and external information flows.

Data Room – a secure environment for your business data 

Virtual Data Room involves the existence of a set of appropriate technical means to ensure the implementation of the information process, and a control system for this set of technical means.

Information resource management for M&A deals in a Data Room means:

  • assessment of information needs at each level and within each management function;
  • study of the document flow of the organization, its rationalization; standardization of types and forms of documents; typing information and data;
  • overcoming the problem of incompatibility of data types;
  • creation of a data management system, etc.