Due to a growing orientation in world markets in the past years, we witness a vast growth in demand for due diligence as a useful tool prior to IPO’s , stock purchases and company merges.
Due diligence is a process providing the investor the ability to identify all opportunities, exposure and risks prior to performing any investments via stock purchases or mergers In order to determine weather a deal is profitable or not. Sometimes the up for market company initiates due diligence processes in order to present to potential buyers it’s economic and legal strengths.
Due diligence includes gathering data from internal and external sources for the examined company, this includes a complete review of all economical aspects, financial and legal reviews and the identification of future orientations in the companies activities as well as analyzing the company’s financial reports.
Due diligence reduces any risks in purchasing a company, seeing that the purpose is to thoroughly check all financial data as well as economical and legal ones in order to unwrap the opportunities an risks involved with purchasing the company while examining the company’s financial reports and their credibility, examining potential assets, examining a complete system synergy with the merging company, examining intangible assets, future agreements, off-balance sheet liabilities, concealed assets and liabilities and more.
In the framework of due diligence much data regarding the company’s activities is examined including:
1. analyzing the company’s financial reports
2. financial strength analysis
3. predictions to further activities and profitability
4. the checking and comparision of assets and liabilities the the ones disclosed in the financial records according to the acceptable accounting standards
5. reviewing all company’s income and outcome and proper bookkeeping
6. reviewing legal aspects
7. checking for diffrend opportunities, unwrapping financial and operational risks and exposures
8. examining the company’s marketing and management layouts
9. examining tax exposures to the tax authorities.
No one disagrees that due diligence is an important enough phase in performing a wise investment and making decisions based on a credible basis, while thoroughly understanding all components of the acquired asset. Including, off-balance sheet liabilities, exposing different business risks and examining the true value of the deal based on data analysis and worthwhile ness. The purpose of due diligence may enable you as an investor to make wise investments based on a creditable and relevant data base.
Yanai Amir accounting office has vast experience performing due diligence procedures , to perform your due diligence – please contact us.