Buying a business is a calculated risk. What may seem attractive from the outside may look entirely different once an investor takes full control. That’s why due diligence is such an important step in the M&A process. Done right, it helps investors minimize risk and gives them confidence that they can actually create justifiable value through the acquisition and provide an appropriate return on capital.

Due diligence has become dramatically more complex over the last two decades. In some cases, acquirers will have to cope with as many as ten different work streams tied to due diligence in the course of evaluating a single deal.

Steps for Commercial Due Diligence

Markets and Competition

What is the relative position of the target? Are there any disruptive challenges or threats to the business model on the horizon? How will the transaction help the investor navigate industry consolidation and create opportunities for growth?

Synergy Valuation

This is the most critical role in the due diligence process. What kind of value can the investor unlock, either by changing the way the acquisition is managed, by integrating it with the acquirer’s core business or spinning of parts of the business as independent companies?

Process Support

What’s the best way to stay on top of the acquisition process? How will the acquirer manage the multiple stakeholders involved?

Regulatory Support

Are there any regulatory issues to consider, and how will they be resolved?

Risk Assessment

Has the investor done a thorough risk assessment of the regions and countries where the company does business.

Human Resources

Is there commitment from senior management to see the transition process through? Is the attrition rate of employees post buyout manageable?

We help clients flesh out their investment thesis on how a proposed deal will make them money. We then work with clients to test the investment thesis by concentrating on the major issues that will determine ultimate success of the deal. Taking an “inside-out” approach, we combine fieldwork interviewing customers, suppliers and competitors to build a proprietary understanding of the investment’s true worth. Combining top and bottom line analysis, we build an integrated view which allows to understand realistic P&L shape and set winning price package during the bidding phase.

HGA’s experience and worldwide network allow us to help clients quickly develop an accurate assessment of key industry performance issues, including cash flow drivers, relevant market and customer benchmarks and return on capital.

Please contact us for additional information.