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Saturday, July 21, 2018

Due Diligence

Due Diligence

The phrase "Due Diligence" identifies the investigation process put into force in order to analyse value and conditions of a company, or of just a branch of it, you are going to acquire, to invest on or maybe there are reasons related to specific certifications.

The "Due Diligence" is also used in the investigations on company employees (or applicants) in order to evaluate their reliability, morality and possible detrimental aspects.

This procedure throughout the time got different features. There are actually "Due Diligence" in commercial field whose aim is to analyse analytically aspects related to the commercial development of The same may be required both as supervision in order to verify flaws in the procedure system and also in a purchase stage, where one of the two or more involved parties intends to check the truth about the exercise and its contents.

There are types of so called registry "Due Diligence", carried out by banks, insurance companies and by all the companies enabled to carry out this kind of check either according to their own protocol or if they are recruited by third parties to carry out this specific professional activity.

The "Due Diligence" is not always subject to production and to the issue of a report, being the precautionary agreement what states if it compulsory if the record must be written or not. The "Due Diligence" report acts as a declaration, thus notifying an activity that was carried out after a mandate fulfilment or an appointment to a physical person or to a company.

In Finance "Due Diligence" shows all those activities carried out by the investor, necessary to achieve a final evaluation, thus analysing the state of the company, risks of a possible failure of the operation included together with its future perspective. It consists in the analysis of all the information related to the company that is going to be acquired, with specific reference to the company and organization structure, to the business and to the market, to the critical factors of success, to the commercial strategies, to the management and administration procedures, to the economic-financial data, to the tax and legal aspects, to the perspective risks, and so on.

Also employed in the property market, "Due Diligence" is also used by the institutional investors and introduces the purchase stage of a property, of a credit of a securitization (package of properties or of credits). Practically it is a multidisciplinary activity aimed at the precise evaluation of the property and of all its features linked to the control of the documents as act of origin, cadastral searches, examination of the detrimental transcriptions, as voluntary and judicial mortgages, contracts (e.g. leasing) and technical/project controls or, perfect correspondence with the registered planimetry (abuses, amnesties, acts of indemnity), quality and building consistency, evaluation of the necessary costs and times for the adjustments of the building (repairs, remaking, change of use or redevelopment). It also includes the economic and financial estimate of the property regarding the current and potential use in consideration of the area where it is placed and the trend of the market (residential, office, commercial or industrial market).

Bright Business Consulting LLP is able to warrant and assist, to coordinate and complete the investigation process that is put in place in order to reach a final evaluation, which also includes the risk of possible failure of the operation and its future perspectives.

Turning our gaze to the companies, Bright Business Consulting LLP provides an organized activity aimed at the collection and verification of information of financial, economic, managerial, strategic, tax and environmental kind as concerns a specific company in order to get a detailed picture of the reality into being.

It is practically fulfilled in

  • An audit or an audit that concludes with an opinion as to the correctness of the economic, asset and financial position in the statement.
  • A company evaluation, that is the definition of the theoretical value of the economic capital of the company through specific methods and techniques.

The application process adopted by Bright Business Consulting LLP in the activity of "Due Diligence" presupposes preliminary meetings with the client followed by the identification of areas of investigation, the drafting of the "Due Diligence", detection and composition of a team of specialists, collecting information about the company, the execution of tax due diligence, drafting the executive summary, the preparation and discussion of the final report, the assessment of the acquisition.

In particular, there are two types the "Due Diligence" that can be performed:

  • The "Due Diligence" that is, the prior investigations carried out during the period preceding the closing of the transaction, has the objective to validate (or not) the intention of the prospective buyer to proceed with the acquisition, operating modes and the most efficient legal instruments and contribute to the definition of key issues such as the actual economic situation and financial position of the target, the organizational efficiency and the quality of human resources, "setting the stage" for the subsequent negotiation of the consideration, contractual guarantees and indemnities for the benefit of the buyer.
  • The next frequent "Due Diligence", is usually limited to accounting issues with the result that, as a rule, any differences allow buyers on the basis of the signed acquisition agreement, to enable correction falling procedures or increase the agreed price or, in severe cases, not to reach the final contract or request a resolution.

Bright Business Consulting LLP offers its clients meetings aimed at verifying the aims and objects of investigation for tax purposes, plan execution time, to establish the mode of action, define the type of required investigation that will be followed by a mandate of appointment.

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