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Due diligence at confluences and absorptions

Due Diligence is procedure of forming of objective picture of object of investing, plugging in itself investment attractiveness and risks, independent estimation of object of investing and great number of other factors. Above all things due diligence is directed on comprehensive verification of legality and commercial attractiveness of the planned transaction or investment project, similarly plays a however unimportant role and plenitude of information, given at this type of verification, that allows investors or business partners in more depth to estimate all of advantages and lacks of possible collaboration.

Originally the term of due diligence came in consulting business from a bank sphere and implied under itself the complex system of collection and analysis of information about target or existent audiences and partners, which intended jars for protecting of propert from possible harm. However on today's this concept left off to be exceptionally by a banking category, now procedure of Due diligens, as a rule, the leadthrough of comprehensive analysis of activity of enterprise means from point of lawyers, financial analysts, public accountants, and specialists for business to secret service.

Who needs a favour:

  • investors interested in investing their money in liquid assets;
  • companies, attracting outside investors free money

A favour is for what needed:

Due dilligens allows to expose all of existent risks (legal, financial, tax, I.t.d.). Research within the framework due Diligence allows to define «adequacy» of price, appointed a salesman. Very often, exactly on results Due dilligens a basic decision is accepted - to buy or not buy. On results conducted DD a customer gets answers for questions:

  • Is it advisable to acquire the asset?
  • holds whether the price invoiced by the seller?
  • What is the real market price of the company?
  • What percentage of illiquid
  • residues in the company?

Due dilligens is conducted in a few stages:

I Legal examination.

  • legal status of the object of research;
  • relationship with the participants / shareholders;
  • Relations with subsidiaries and affiliated companies, as well as other subjects, where there are shares / equity;
  • Conduct register of shareholders. Major transactions in shares of the Company and the data on the change of owners;
  • Other securities owned by the Company;
  • objects of ownership (real estate, stocks, etc.) Documents of title to real estate and other assets of the Company, the definition of purity acquisition of these assets and, accordingly, the legal risks of loss of property;
  • Legal examination of the lease; validity period, the pricing mechanism, the possibility of termination and / or renewal to the different conditions, the liability of the counterparty;
  • Other significant tangible and intangible assets of the Company;
  • legal status of existing intellectual property (patents, know-how);
  • loans, guarantees, pledge agreements, mortgages and other obligations of the Company's assets, those with warranties, the different types of bills and obligations.
  • List of major powers of attorney of the Company
  • Personnel and labor relations. The collective agreement or other agreement between the staff and the Company.
  • terms of existing contractual relationships with partners and customers, as permanent and disposable;
  • Licenses and permits;
  • Determining the vulnerability of the
  • to hostile takeovers (raider attacks on business);
  • Existing and potential
  • (ripening) litigation. The main existing claims against the Company;
  • main outstanding claims / lawsuits.
  • Dew dilizhens identifies existing legal risks and their impact on the cost proposal. At this stage dilizhens Dew, a consultant, is developing detailed recommendations for corrective action. In some cases, identified during the due diligence (Dew dilizhens) indicate the inadvisability of the risks of the transaction. The work of lawyers is to report on the legal expertise of the company.
A job of lawyers performance is a report on legal examination of company.

II Financial examination.

One of the basic stages of Due dilligens. Allows to define basic financially-economic performance of Company indicators. In addition, on this stage the degree of «transparency» of administrative account and necessity of bringing him over is determined in accordance with the requirements of investor. In future, information of the normalized accounting is used for the estimation of object of sale.

III Book-keeping and tax audit.

Obligatory part of due diligence. Allows to define authenticity of record-keeping and accounting, and similarly degree of riskiness of tax charts. High tax risks can substantially reduce the cost of enterprise. On results Due diligens a consultant develops recommendations which allow to take tax risks to the minimum.

IV Business is secret service.

A not unimportant role in the leadthrough of Due dilligens is played by specialists on collection of confidential information.

Study of the subject, including the following information:

    The real story
  • enterprise.
  • Key persons of the enterprise. The real beneficiaries.
  • Relationship management and / or beneficiaries of the enterprise with state authorities.
  • Corruption moments in the creation, privatization and enterprise activity.
  • History and the so-called "Winning formula" of the Company.
  • Possible consequences
  • sale of the Company for its success.
  • main contractors / clients.
  • summary history of relations with existing contractors, conditions for cooperation.
  • reputation in the market.
  • Participation inspected enterprises in conflict / scandalous situations.
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