Unmasking the right deal through buy-side due diligence
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:
Steve Klinsky, founder of New Mountain Capital, is up close with RSM's Don Lipari to share his thoughts and insights on an array of topics.
Swifter product life cycles, still-high equity markets and relatively cheap debt continue to encourage consolidation among strategics.
Significant opportunities for innovation and investment continued to define the health care industry through Q1 2018.
A large amount of dry powder combined with relatively few opportunities has created an imbalance in supply and demand.
Due to the disconnect between buyer and seller expectations, the market has recently experienced more broken deals than in prior quarters.
Howard Morgan, co-founder of Argand Partners, is up close with RSM's Don Lipari to share his thoughts and insights on a vast set of topics.
If your company is considering a merger, find out what strategies you can implement to help ensure your integration is successful.
A panel of private equity deal experts discuss the trends behind the deal statistics and outcomes from Q1 2018.
RSM professional talks about the impacts of the new revenue recognition standard and its effect on private equity firms.
Pine Brook CEO Howard Newman is up close and personal with RSM's Don Lipari to share his thoughts and insights on a wide array of topics.
Record-high transaction multiples for IT companies deter speedy closes and incentivize greater acquirer diligence.
Significant deal value, propped up by outliers, suggests cash-rich acquires and fervent bidding for top assets.