Due diligence is a comprehensive assessment process performed by investors ahead of completing a transaction to satisfy themselves and provide necessary assurances ahead of completion. The investor needs to be confident in what they’re buying – is everything as expected? Are there any hidden risks or liabilities that might be inherited on purchase? And is the price they’re paying for the company in question fair and reasonable?

At Wilson Partners, we provide financial and tax due diligence services, analysing a target’s assets, financial history and future forecasts enabling us to, among other things, understand its true profitability and thus opine on valuation and the achievability of future prospects. Our tax due diligence is performed by our in-house Tax Team typically addressing historical compliance (Corporation Tax, PAYE, VAT etc) and the identification and quantification of potential tax exposures, or historical transactions that could lead to future tax risk. We also regularly look at restructuring, share schemes, and group aspects as part of the overall transaction for our clients.

Other forms of due diligence:

• Legal due diligence – investigates the legal risks associated with the deal in question, for example, HR, compliance, litigation and disputes, IP, assets, contracts.
• Operational due diligence – assesses the infrastructure of the target and its operational efficiency.
• Commercial due diligence – provides the investor with a comprehensive insight into the targets business environment/market ad the prospects that exists through consideration of a variety of relevant factors that influence the business.
• Technological due diligence – reviewing the targets technological infrastructure, processes, applications, and capabilities.

What is vendor due diligence (VDD)?

Vendor due diligence takes place when the seller looks to evaluate the risks that would be considered by a potential buyer themselves and therefore takes place and is prepared ahead of going to market, giving the seller the opportunity to address any issues or risks flagged in the report in advance. This process allows the seller increased control over the process and information, and greater comfort in relation to the quality of the figures – that no ‘hidden surprises will be uncovered during an externally led process.

Once the business has gone to market and the VDD report is then available for potential buyers, giving them quick access to the business’ financial situation and development, allowing key areas/issues to be discusses upfront. VDD demonstrates a level of proactivity ad commitment from the vendor, often marking them more attractive to buyers and tends to lead to an increased pace of transaction and reduced risk of failure in the latter stages.