Due Diligence Packages (Credit Binder)
Due Diligence is a term used for a number of concepts involving either the performance of an investigation of a business or person, or the performance of an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target company or its assets for acquisition.
Planglobal has a consulting package to create your company's Credit Binder. The Credit Binder is the professional documentation package that you give to your Bank, VC, or investor to prove yourself, your plans, and your resolve and commitment to implement your plans.
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Due diligence is the cornerstone of private equity investment success. There are many reasons for conducting due diligence, including the following:
- Confirmation that the business is "what it appears to be"
- Identify potential "deal killer" defects in the target and avoid a bad business transaction
- Gain information that will be useful for valuing assets, defining representations and warranties and/or negotiating price concessions
- Verification that the transaction complied with your investment criteria.
In addition to your internal resources it helps to have an "extra set of eyes", in the form of expert outsource resources, assisting with due diligence assessments. Some of the benefits of outsource due diligence include:
- Access to experience, expertise and objectivity
- Protection against liability
- Higher transaction success rate
Asking the right questions
Creating shareholder value through acquisitions is a necessary, but often challenging part of many companies’ growth strategies. Successful deals have always been difficult to pull off (70 percent of deals create no shareholder value) and they are even more difficult in the current market. Success depends on mastering the whole process from target identification and assessment through to integration and benefits realisation.
We aim to understand your strategy and tailor a due diligence approach specific to your needs, including:
- Pre-deal evaluation for prospective takeovers, mergers, acquisitions and disposals;
- Transaction evaluation;
- Structuring;
- Vendor assistance;
- Contract assistance;
- Post-deal implementation;
Our holistic, value-driven approach to due diligence will increase the probability of success in your deal.
Our unique approach to transactions allows us to help you identify both the opportunities and obstacles to realisation of value from transactions. Our advice is tailored to your needs, the transaction and the sector.
We can assist right across the transaction cycle or we can provide assistance in only one particular role at any point in the cycle.
Transaction evaluation (Due Diligence)
We help assess the key issues facing the business and the drivers behind maintainable profits and cash flows through commercial analysis of the business and its operations. We provide an investigative analysis of a business, typically including an analysis of:
- historic results;
- forecast projections;
- growth prospects;
- tax issues;
- working capital;
- capital requirements;
- cash flows;
- valuation opinion;
- intangible assets;
- commercial considerations;
- information systems and controls;
- the management team;
- human resources issues;
- legal issues; and
- environmental matters.
Structuring advice
We assist with the creation of efficient deal structures, optimising your tax, accounting, commercial and legal position.
Vendor assistance
we assist with preparing information memoranda and managing data rooms, answering purchaser queries, undertaking vendor due diligence and performance of independent business reviews.
Contract assistance
We support the negotiation and completion phases of transactions, advising on contract drafting, price adjustment mechanisms and the scope of warranties and indemnities.
Post-deal implementation
We provide integrated programs to identify, prioritise and solve implementation issues, rationalise systems, technology and products, integrate industry best practices and to retain key staff as well as incentivise and build a strong and dynamic management team.
Questions:
When is due diligence conducted? Initial data collection and evaluation commences when an equity investment opportunity first arises and continues throughout the talks.
How is due diligence conducted? Planglobal creates a checklist of needed information for the management of the target company to pull together. Financial statements, business plans and other documents are reviewed. In addition, interviews and site visits are conducted. Finally, thorough research is conducted with external sources including; customers, suppliers, industry experts, trade organizations, market research firms and others.
Can you overdo the due diligence effort? Yes. Too much due diligence can offend a target company to the point where they walk away from a deal. It can also result in "analysis paralysis" that prevents you from completing a transaction or provides time for a better competing offer to emerge. A sensible level of trust concerning lesser issues often must balance appropriate investigation and verification of the most important issues. Due diligence is prioritized and executed expeditiously.
What is the cost of due diligence and who pays for it? The cost of due diligence is based on the scope and duration of the effort, which in turn are dependent on the complexity of the target business. These costs are typically viewed as an essential expense that far outweighs the anticipated benefits and the downside risks of failing to conduct an adequate review.
The following are the 31 things required for Due Diligence:
- Term Sheets, Corporate Summary Fact Sheet
- Business Plan
- Marketing Plan
- Key Personnel Resumes
- Financial Planning, Cash Flow Model, Analysis Reports, Glossary
- Financial Statements
- Profit and Loss Statements
- Balance Sheets, Intercompany Transfers
- Accounts Receivable / Accounts Payable Aging Summaries
- Tax Returns
- Asset Ledger
- Client List and Actual Sales
- Shareholder Statements
- Credit and Security Agreements
- Minute Book
- Summary of Litigation
- Non-Competition, Non-Solicitation or Non-Disclosure Agreements
- Filings with agencies (U.S. and foreign) having jurisdiction over business operations
- Customer and Vendor Contracts
- License or Royalty Agreements
- Promissory Notes, Bonds or Debentures
- Options or Rights for Capital Stock or Company Assets
- Partnership, Joint Venture, Marketing or Similar Agreements
- Material Contracts and Agreements
- Cost Sharing Agreements, Intercompany Transfers (Company Affiliates)
- Contracts or Other Documents Affecting the Business Assets
- Development or Technology Agreements and Documents Relating to Business Assets
- Corporate Policies (Insurance, Operational, Health, Safety, HR)
- Summary of Pending or Proposed Assessments or Tax Liens
- Listing of Sales and Use Tax Returns (All Affected Jurisdictions)
- Implementation Plan
Tom West, +1 403 235-3495 x201 |
