Due Diligence Processes

Due Diligence is usually applied in cases of acquisitions of companies, or parts of them, to know in depth their financial situation and the status of their assets; especially the existence of hidden liabilities or overvalued assets; as well as the tax or labour contingencies that may exist, the contractual commitments made, their situation with respect to regulatory compliance, etc. Likewise, they are also applied by a company that is considering the sale or entry of external investors (vendor due diligence) in preparation for such process, to check the company’s strength or detect any existing weak points before Due Diligence by the buyer, thus being able to correct them in advance.

Audalia Nexia is a multidisciplinary firm; therefore, we have specialists in many different areas, which allows us to perform global Due Diligence processes reviewing not only the financial aspects of the company, but also its tax, legal, labour, or environmental fields, among others, providing thus an integral service. Under the coordination of a partner in charge, we facilitate the efficiency and effectiveness of the work and discharge the client from the necessary coordination when the different aspects of Due Diligence are performed by several firms providing professional services.

All this provides the parties with a thorough knowledge of the entity involved in the transaction, constituting a basis to determine the value of the business, require specific guarantees based on the detected contingencies, and decide, ultimately, if the transaction must continue or be abandoned.

In addition to the Due Diligence process itself, our team of lawyers with the support of experts from other areas to the extent necessary can help the client in other relevant aspects of business transactions, such as the preparation or negotiation of letters of intent, purchase agreements, or the design and implementation of corporate restructurings prior to the sale (mergers or split-ups).

Buy-side due diligence

Our teams, provided their experience and the methodology developed in a wide amount of similar tasks, collaborate
in each acquisition project by identifying, analyzing and evaluating risks and key matters of the target company, all of it undertaken from several perspectives and offering thus a 360º perception that allows you to take the right decision on carrying out the transaction, on the guarantees to require, on agreements on specific aspects, etc.

We maintain a fluent relationship with our client during the due diligence and we immediately inform him/her about any significant finding that might affect the transaction, without waiting for the report draft to be drafted.

Vendor due diligence

In a selling transaction, we act prior to the transaction (we ideally act even before the identification of a potential purchaser, as part of the decision taking in the selling process) in order to help you to make the purchase process safer. In these cases, we can work on a double aspect:

  • On the one hand, we provide you with reliable and consistent information on potential purchasers, allowing thus the management team to minimize time dedicated to the selling process.
  • On the other hand, we examine your company to detect potential contingencies or vulnerabilities before the purchaser undertakes its own due diligence. In some cases, this allows you to correct or, if it is not possible, to know them and be forewarned of additional guarantees that purchasers might request, of price or payment method modifications, etc. Thus, you may be able to establish adequate strategies beforehand.

Aspects to review in a Due Diligence

Of course, our aim consists on being adapted to your needs by giving you our maximal added value; therefore, each due diligence concrete scope will be defined previously when beginning the work. Nonetheless, and regardless it consists of a purchase or of a selling due diligence, our firm has specialized professionals to check risks, contingencies and key aspects of the target company from different points of view. Their main objectives are the following ones:

Financial

  • Determining if the valuation methods used by Company correspond to the circumstances and valuating if the most significant elements are properly supported.
  • Determining if significant liabilities reported reasonably reflect Company’s debts and commitments.
  • Determining if provisions and other contingent liabilities have been determined with appropriate estimates and according to the most probable hypotheses. Investigating that there are no significant obligations or commitments different from the already reported.
  • Checking reasonability of magnitudes used to calculate the EBITDA, of working balance and other parameters that are decided to be significant for the Transaction and that impact in the valuation of the Company.

Tax

  • Checking if Company’s tax liabilities are complied.
  • Investigating, given the case, if there is any significant tax contingency and, if possible, its quantification and the possibility of being produced.

Legal

  • Analyzing Company’s legal situation from a corporate and contractual point of view, by informing about the legal situation of its assets and about liabilities assumed by Company.
  • Analyzing ongoing lawsuits.

Labor

  • Checking the labor legislation is properly applied, contribution to the Social Security included.
  • Analyzing labor and administrative labor litigations that Company may have initiated and that could be in process while we undertake our task.
  • Determining and, if possible, quantifying, any possible contingencies in the labor legislation.

Information technologies

  • Checking Company’s situation with respect to information technologies, determining its strengths and soft points.
  • Evaluating if your system supports those from the purchaser company and if it is easy to integrate.

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