With an ever increasing demand for a thorough understanding of the level of risk associated with investments, joint ventures, merger and acquisitions or becoming a shareholder in a new business opportunity, the need for ‘non vanilla’ due diligence is essential to prevent financial loss or reputation harm whether you are a corporate or individual client.
The UK Governments proposed crack down on ‘white collar crime’ means that directors and board members will also be held criminally responsible for fraudulent activities whether knowing or unknowingly therefore deep dive due diligence prior to entering into business or transferring funds is essential.
Our overall risk and performance due diligence is conducted as a drain lifting, deep dive project providing a grass roots view focusing on specific areas based on our experience, but not relying on open source data which can be compromised, manipulated, false, historic or biased.
Our recent survey of BSG clients who were victims of investment fraud indicated that their level of due diligence was solely reliant on their ability to obtain data from the Internet or information provided by the recipient prior to transferring funds. The majority of victims took comfort from the recipient having a registered company, web site, escrow or bank account and provision of a contract with a force majeure and a personal guarantee. Building a facade is easily done and relatively cheap to do so. Personal guarantees have no value if the person or entity has no backing assets in their name and an escrow account provides limited security for your funds.
Ensures a clear picture of previous successes, trading history, property developments and personally held assets to the value of personal guarantees. our highly experienced analysts look for the non obvious and conduct stringent verification processes.
Can include an assessment of policies and procedures to mitigate the risk of foreign bribery and a review of payment information to assess and, if necessary, mitigate post acquisition exposures arising from pre-acquisition compliance violations.
Can include background checks or physical surveillance of the target, its shareholders and key executives. Prior instances of fraud, corruption, money laundering, trade compliance, labour, and product safety or other adverse issues can be identified through focused integrity due diligence research. Public records can also reveal financial red flags such as bankruptcies, liens, and excessive litigation for the company and/or its principals.
Looks at potential legal exposures and risks, usually including a review of key commercial agreements, IP, and contracts. Counsel’s involvement in overall due diligence is crucial in the negotiation and drafting of the acquisition agreement, transition services agreements, and need for indemnities, escrows, and post-acquisition true-up mechanisms (e.g., net working capital net debt adjustment clauses).
Generally includes a detailed analysis of audited financial statements, monthly or quarterly historical financial information, reading of the audit work papers, analysis of the details supporting publicly available financial information, as well as interviews with financial management and the external auditors. This process can yield significant observations on the target’s earnings (such as non recurring or one-time activities and reserve releases), and insights into post-transaction needs for net working capital, and can shed light on debt like exposures and trends in operating results and capital expenditures, among other areas.