Due diligence

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At the time of economic uncertainty there are many opportunities for development. Investors looking for new areas of growth, prospects and new sources of income make decisions on acquisitions of other companies.

These decisions are subject to high risks, associated with limited access to information concerning the planned transaction. Reliable and credible information ensures the efficiency and safety of the acquisition. Due diligence performed by our dedicated team of professionals (among others. in the field of finances, tax law, accounting law, commercial and civil law) provide such information to investors.

Due diligence is also a useful tool for Sellers. It provides them with the knowledge of the risks which may be identified by potential investors during the acquisition process and makes it possible to minimize their impact on the course of negotiations with the Investor, thereby increasing the chances of an effective exit from the investment.

Benefits of the due diligence process for:

Investor:

  • Identifies and provides reliable information on the subject of acquisition
  • Provides support in making rational and optimal investment decisions
  • Allows you to verify the accuracy of the valuation of the subject of acquisition
  • Allows you to evaluate the profitability of the investment as well as to estimate and minimize the associated risks
  • The results of the due diligence are an essential instrument for negotiating the terms and conditions, including the transaction price

Seller:

  • Identifies and provides information on the key areas and financial and tax risks, making it possible to eliminate or minimize them before entering into negotiations with the investor
  • Allows you to prepare a negotiation strategy that takes into account the probable results of due diligence carried out by the Investor
  • Minimizes the burden of financial and accounting services through preparing the same for the due diligence process carried out by the Investor

The range of services includes:

Financial Due diligence

  • Analysis of corporate documents in order to obtain information about significant events that could have an impact on the Company’s financial and tax affairs
  • Analysis of the Company’s customers and suppliers and the major contracts in terms of financial and tax risks
  • Analysis of employment
  • The Company’s financial analysis including ratio analysis and cash flow analysis, taking into account the demand for net working capital
  • Verification of significant items of the financial statements in accordance with the Polish Accounting Standards, having regard to the International Financial Reporting Standards
  • Estimates of adjustments that affect the Company’s net assets and profit or loss (EBIT / EBITDA)

Tax Due diligence

Corporate income tax

  • Verification of compliance of declared income and expenses with the values disclosed the accounting records
  • Identification and assessment of the differences between the amounts of income and expenses established for accounting and tax purposes, together with relevance of the respective inclusions and exclusions
  • Analysis of the types of income (based on a review of the structure of income) in order to determine the point when income is recognized for tax purposes
  • Analysis of the types of expenses (based on a review of the cost structure), together with the detailed examination carryed out on the basis of source documents relating to relevant cost items (identification of the transaction)
  • Identification of transactions with related party that may create a risk of transfer pricing

Tax on goods and services

  • Verification of the completeness of taxation with the tax on goods and services by reconciliation of the taxable basis of goods and services tax with the value of income disclosed for accounting purposes and the value of other operations disclosed in the accounting records which are taxable transactions.
  • Assessment of the accuracy of disclosure for the purposes of tax on goods and services of supporting documents relating to the purchase and sales (examination on a random basis)

Individual income tax

  • Verification of the correctness of the calculation of income tax prepayments from individuals (in relation to staff employed under a contract of employment, commission contract and specific work contract)
  • Real estate tax
  • Verification of the accuracy of taxation

Business Due diligence

  • Analysis of the sector (to identify the factors influencing the results in the sector, trend assessment)
  • Analysis of market position of the Company and its competitors (assessment of the prospects of business development, analysis of the Company’s competitive environment)
  • Analysis of the Company’s organization and its employment (analysis of the levels of decision-making and accountability of key employees and the efficiency of the management accounting system)
  • Analysis of financial forecasts (analysis of the assumptions for financial projections)
  • SWOT analysis

Legal Due diligence

  • Analysis of corporate documents to confirm their compliance with applicable laws and regulations (including the assessment of their validity and effectiveness)
  • Analysis of the ownership titles to the Company assets (real estate, movable property, perpetual usufruct rights, intangible property rights)
  • Analysis of receivables and debts, status of claims and undertaken debt collection and enforcement activities
  • Analysis of the legal status pursuant to the provisions of the labor law
  • Assessment of the situation in the context of the provisions regarding the competition and consumer protection
  • Assessment of the legal status pursuant to the provisions of environmental legislation – the analysis of the received administrative decisions, protocols, audit, reviews

Vendor assistance

Assistance for the Seller in the due diligence process includes, among other things:

  • Creating data room rules
  • Data organizing and managing, including preparation of documents which will be made available during the due diligence
  • Developing the forms of shared documents
  • Formulating answers to questions asked by auditors
  • Reviewing financial statements and tax returns of the Company in order to identify key financial and tax areas and risks

To find out more about our due diligence service, feel free to contact our advisers.