So what is due diligence and why is it so important?
Due diligence is the analysis of financial information so that a particular set of questions about a business can be understood. Due diligence is usually a process by which we gain an understanding of the financial information presented to us, and use that understanding to prove various aspects of the business.
For example, is a business achieving a certain set goal, or is the business that I want to buy valued correctly and does each component of their purchase (plant and equipment, goodwill, stock on hand) make financial sense. Is the financial information, for which the value is based on, accurate?
Due diligence is usually combined with a business valuation. In this combination we use the financial statements, business activity statements, leases, and any other financial information to analyse the correct value for the business.
This is a very important skill sets because the value of a business is not as easy to ascertain when compared to the value of a share or a piece of property. There are many factors that make up a successful business and each of those factors may need to work hand in hand so that you can maintain the profit and subsequently, your life goals.
Engaging with Cheesman Applegarth Accountants will save you the time of researching the appropriate preparation and management of all issues related to due diligence. Our high level of advice and guidance will help you make informed choices for your financial future.
Gathering financial, commercial and operational data needs to be done in conjunction with attention to the workforce. A major factor of success is to understand the culture of an organisation and the roles, capabilities and attitudes of its people. Do they fit with yours? Initial big changes may mean higher short-term risk.
Cheesman Applegarth Accountants will provide expert advice on:
- Analysing the Value Of The Target Business
- Making The Best Acquisition
- Honing Your Deal-Making Acumen
- Comparing Your Industry Presence With Competitors
- Measuring Your Capabilities Against What Is Required
Effective due diligence is about balancing opportunity with informed caution. It is about testing every assumption and questioning every belief. Don’t fall into the trap of believing you can solve problems after they have arisen.
Cheesman Applegarth Accountants have the business acumen to advise on identifying the purpose of a deal and which structure and culture an organisation should adopt.
Our high level of advice and guidance will direct you to the correct understanding in the areas of risk management and identifying the best options.
The key to effective diligence is recognising a good decision from the bad. The most successful acquirers consistently uncover the opportunities while assessing and understanding the risks, which allows them to capitalise on any available profit growth. Very important to fully anticipate the downside, not get swept up in the excitement that can cloud perception and take off the ‘rose coloured glasses’ to make sure the business purchase decision is the right one.
Best practice business decisions are created only after identifying the hidden value in assets.
It’s essential to formulate a strong, well-articulated plan in advance and to concentrate analysis on proving it. If a potential transaction has strategic value, the assertion needs to be backed up with sound thought, competitor insight, industry data and analysis about how profit pools are likely to evolve.
Whether your business is still in the early planning stages, looking at future business growth or a new purchase, we will make sure your due diligence plans are well prepared and understandable. Contact our office for an initial one-on-one discussion.