© 2019 RSM US LLP. All rights reserved.
Invest confidently through buy-side due diligence
Adding to your private equity portfolio? Unmask the right deal.
Making the right acquisition at the right price is critical in today’s complex and competitive deal-making environment. If hasty decisions are made to buy without completing overall business, technology, financial and operations assessments, the transaction may be delayed or systemic problems may not be uncovered until post transaction, causing business disruptions, stresses on your existing portfolio businesses and financial losses. Or, worse yet, the targeted business may not be valued appropriately due to undisclosed issues pre-sale. Finding that out after the deal has been executed could not only be challenging, but harmful to your overall future business.
To minimize transaction risk, employ a fully integrated buy-side due diligence process that includes financial, tax and operational due diligence. This integrated approach can help you understand your risks and opportunities so you can make an informed decision about how and whether to proceed with the deal while protecting your interests.
Specifically, the process unmasks and assesses the following areas about the targeted business:
- Earnings and cash flow quality
- Assets and liabilities quality
- Internal control weaknesses related to systems and personnel
- Deal structure from a tax perspective
- Federal, state and local tax compliance risks and issues
- IT infrastructure and system issues and future cost savings and requirements
- Financial projections
- Purchase agreement details and alignment
- Risks and costs associated with complex transactions like carve-outs and add-on acquisitions
Understanding the above allows you to weigh transaction price and terms as well as the future of the targeted business. Other advantages of an integrated buy-side due diligence strategy include:
- Gained insights about risks and opportunities to address pre- and post-transaction
- Efficient transaction speed, and in some cases, accelerated transaction close
- Maximized organizational and operational efficiencies in add-on integration
- Minimized transitional service agreement cost burdens for carve outs
- Reassurance of day-one readiness with seamless resources support
- Efficient management adaption to private equity ownership
Buy-side due diligence allows you to analyze and validate critical financial, operational and strategic aspects of the deal, making it easier for you to structure and negotiate a favorable transaction that’s right for your overall portfolio.
You may also be interested in:
To identify risks and opportunities in telehealth deals, investors must assess these key IT and security considerations.
In this competitive deal landscape, identifying value enhancement in the form of synergy and cost savings is more important than ever.
If a security breach occurs during the holding period, it jeopardizes the overall investment objectives, hence the need for cyber diligence.
An in-depth discussion between two technology industry veterans: Richard Lawson, Co-Founder of HGGC and David Van Wert of RSM.
Read insights from the PE community on managing portfolio company cash flow, assessing operational threats and planning the next M&A move.
Despite slips from the record results of 2018, 2019 activity for venture capital investments remained robust.
As software has grown exponentially as an industry, private capital has flowed into the sector in greater and greater amounts.
IT due diligence can mitigate operational risks and identify investments needed to achieve the revenue objectives in the investment thesis.
Audit readiness shouldn’t be an afterthought of an acquisition. Being well prepared minimizes financial risks to your private equity firm.
Failing to uncover significant operating and financial performance drivers can put a deal and the investors at risk and it’s not necessary.