De redactie
Redactie
Financieel Management

The investor and banks will carry out due diligence investigations to verify the information provided and to ensure that they fully understand the current state and potential of the business.

Up to this point the decision to finance the buyout will like-ly have been largely based on information supplied and representations made by the management.

The scope of the due diligence may vary depending on the business. The investigations may include financial, market, legal, technical, taxation, pension and environmental audits. This exercise will place an additional burden on management at a time when they are also involved in drafting legal documents and arranging finance, not to mention managing the business.

In determining the scope of the due diligence, the requirements of all financiers of the buyout has to be taken into account. Otherwise additional reports may be needed for the comfort of providers of bank finance or other financiers, which can cause delays close to completion.

Should the due diligence investigations reveal any major issues, it should be considered raising them to the vendor while drafting the agreement. There will then be time to discuss them in a sensible and trusting way and let the vendor adjust his expectations. Bringing them up when concluding the agreement could create the risk of the vendor pulling out of the deal.

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