What is due diligence?
Due diligence is one of the key steps in the purchasing process.
- Estimation of contracting from the commercial, financial and legal point of view.
- A process in which an interested party (e.g. a potential buyer of a company) checks all aspects of a company’s business prior to its sale or acquisition in order to avoid uncertain situations and possible disputes.
All processes are guided under supervision:
- Process description (input and output values, process owner, process flow, responsibility, process requirements, KPIs),
- Setting measurable process goals based on comparable data and information,
- Measuring and monitoring the process through key performance indicators (KPIs)
- Analyzing data and report on the success of the process,
- Improving the process.
What are the goals of due dilligence?
Define all elements that have a financial impact such as:
- Financial indicators
- Overview of cash flow (operational, investment, financial)
- Structure of debt
- Structure of working capital
Due dilligence Services
Financial due dilligence
As part of the implementation of the financial due diligence, we will present trends, interpretations of values and implications of historical results, with emphasis on:
- Days receivables, days payables
- Current ratio and accelerated liquidity ratio,
- Revenue and cost structure of products sold, gross margin,
- Structure of fixed operating expenses (OPEX) and impact on EBITDA,
- Normalization of EBITDA,
- Structure of capital, net debt movement, ratio of selected earnings and debt ratios, debt and cash flow ratio, and coverage of fixed financing costs,
- Analysis of the operational and cash cycle in days,
- Analyzing the structure and degree of utilization of long-term assets, historical CAPEX and the need for additional CAPEX in the future,
Identifying non-operating assets, selling or putting into function,
- The compliance of the accounting policies used with the International financial reporting standards
Tax due diligence
Tax on profit
Review and analysis of tax returns and cost accounts (tax deductible expenses), used tax reliefs, related party transactions and potential risks and analysis of deferred tax calculation.
Overview of annual and monthly VAT registration, tax books and analytical account cards showing VAT and pretax claims, sample of incoming and outgoing invoices.
Income tax and contributions:
Comparison of monthly ID forms with payments on accounts payments and payments accounts, control of income taxes from independent work and analysis of personal Income tax treatment, review of fees approved for employees, analysis of payments fees under work contracts and copyright contracts.