Getting your business ‘due diligence ready’

The transaction services team has been kept very busy throughout 2024; whilst the Budget drove a peak in activity (with 10 deals completed in the 10 days leading up to it!) continual deal flow was the flavour of the year.

A greater focus on cash conversion to maximise the value has been top of clients’ agendas, particularly following the Budget in October. As always tax due diligence is a key part of any transaction, understanding this early in the process is imperative to ensure that deal value and timings are managed appropriately.

Here are some of the items that have become key factors in due diligence processes over the last 12 months – and which are set to remain crucial going forward.

The power of data analytics

We are having an increasing number of conversations with clients about big data and how we can support analysing either the target or their own portfolio company’s data.

Our data insights team is helping to transform our clients’ approach to and use of, data, both from a transaction process perspective and to help management make informed decisions based on live information to drive up future profitability.

Cyber due diligence

As well as data insights, our dedicated cybersecurity team is also having inbound enquires as part of transactions that we are working on.

This involves evaluating the target company’s cybersecurity posture to identify vulnerabilities, potential threats and compliance issues that could impact the deal. Conducting thorough cyber due diligence helps mitigate risks, informs negotiations and ensures a smoother transaction process

The importance of robust financial information

All too often we find that financial information that management has relied upon to receive offers does not stand up to rigorous due diligence, be that through error in accounting treatments, omission of liabilities, or sometimes a lack of in-depth understanding of the numbers. The smoothest due diligence processes are those where management information has been carefully scrutinised and quality assured prior to the process commencing.

A strong financial model protects value

A good financial model helps a seller tell the story of the business and how management intend to achieve strong future results. Without a good quality financial model, supported by a robust business plan, as a seller you may be leaving value on the table or leaving yourself open to price chips.

Tax compliance is key

We have increasingly seen aggressive attitudes to historical tax compliance causing major issues in transactions. Demonstrating an impeccable approach to historical tax compliance through due diligence greatly improves the chances of a successful transaction.

Vendor support

In light of the above factors and in an environment with greater examination on due diligence as part of a sales process, it is more important than ever to be prepared.

As financial due diligence experts, we are happy to provide comprehensive advice and support in the run up to a process, so that you can go into the due diligence phase confident that your presented results will stand up to challenge and that value won’t be eroded by the buyside advisers. As part of this, we regularly work with other M&A advisers, be it Big 4 or M&A boutiques and are pleased to support the overall transactional market to ensure deals get done!