Experience shows that companies that performed a due diligence prior to the corporate acquisitions improved the profitability of the transaction. At Fahn Kanne Consulting, we understand that the acquisition of a company without a prior due diligence is like buying the proverbial "cat in a sack".
Our firm's business consulting team consists of experienced experts who understand merger and acquisition transactions.
Our approach is based on identifying opportunities and threats, with a goal of maximizing the value obtained versus the transaction price. The firm's professional staff generates value by offering practical suggestions as opposed to confirming what you already know.
What is a due diligence?
An accounting – financial due diligence is an assessment of the major areas of operation of the business being acquired. This examination includes a review of the economic – accounting aspects of the target business and an analysis of its financial statements, in order to identify and quantify the risk on the one hand and the potential of the acquired business on the other, on behalf of the future acquirers.
What does the due diligence actually examine?
• An assessment of the significant criteria for the success of the business
• An examination of the financial and operational risks
• An analysis of the financial statements of the business
• An assessment of the sales, marketing and business strategy frameworks
• An examination of the reliability of past data
• An examination of the reasonableness of the financial forecasts
• An assessment of the financial fortitude of the business
• A review of the legal and contractual aspects of the business
• An evaluation of the level of management at the business and the quality of its executive staff
How does a due diligence reduce the risks and hidden liabilities of the acquisition of the business?
A due diligence reduces the risks involved in the acquisition of a company for the investor due to the fact that the examination thoroughly checks a number of important parameters. When acquiring private companies, the due diligence will check the accounting system, liabilities to employees, non-bank guarantees, the existence of hidden liabilities and the existence of surplus assets which the former owners of the Company are trying to spirit away from the Company.
As a rule, identification of intangible assets may impact the accounting profit in the years following the acquisition.
Due diligence of companies abroad
The due diligence concept is a world-wide phenomenon
Please note that the financial reporting principles practiced by businesses depend on the reporting principles practiced in their countries of residence. Such principles may vary from country to country. The level of supervision of the local authorities may also vary from country to country. Investors have to also take into consideration local laws and regulations that have accounting ramifications and may impact the feasibility of the intended purchase transactions.
Discrepancies in business culture, which crop up in practically all transactions between investors and companies from different cultures may have an impact on the nature of the due diligence. In addition, it should be noted that there are variances in various countries between the procedure applicable to private companies and those that apply to public companies.
Therefore, investors would be wise to assess when acquiring a company or a business abroad the nature of the due diligence to be performed so as to avoid any unpleasant surprises.
How does one overcome the difficulties involved in performing a due diligence abroad?
It is possible to circumvent objective difficulties by turning to large international accounting organizations that have a large number of branches on the different continents. Our firm, Fahn Kanne Consulting, is a subsidiary of Fahn Kanne & Co., the Israeli member firm of Grant Thornton International, one of the five leading accounting firms in the world. The wide dispersion of such a large international organization provides Israeli investors with an important advantage when conducting due diligences among businesses and companies located on foreign shores.
Our firm specializes in preparing expert opinions in the fields of accounting, economics, finance and banking for use in litigation and bridging proceedings.
Opinions for use in legal proceedings – areas of expertise
Expert opinions assist in resolving conflict on a number of planes:
• Relations between companies, owners and executives
• Relations between insurance companies and clients
• Relations between banks and clients
• Interfamilial relationships – distribution of assets among family members
Opinions provide support for the commercial needs of companies, liquidation proceedings, receiverships and stays of action in the field of torts.
In addition, our firm specializes in accompanying and consulting for family companies and in the preparation of expert opinions in files dealing with family companies.
The following is a description of the topics covered in our expert opinions:
• Fairness opinions
• Protecting minority rights
• Intellectual property
• Copyright violations
• Disputes between shareholders – second and third generations
• Economic disputed as part of divorce proceedings
Liquidation, receiverships and stays of proceeding
• Valuations for determining sales prices
• Asset valuations and ways to divide up assets
• Checking repayment capabilities and ability to meet liabilities
• Assistance in accountant and management matters for attorneys in liquidation and receivership proceedings
• Economic opinions on the issue of loss of profits, loss of revenues and damage evaluation
• Economic damage claims in accordance with the Law for Compensation for Traffic Accident Victims
• Loss and impairment of goodwill
• Appraisal of damages as a result of fires and natural disasters
Partner, CEO of Fahn Kanne Consulting Ltd.Find out more about Shlomi Bartov