Due Diligence: Objectives
Mistakes are sure to occur when you are doing huge transactions in your business. Even a tiny mistake can lead to big troubles when you are in a business especially in the UAE. Whether a new supplier, a partner in a transaction or an acquisition target, third party relationships not just produce opportunities but risks too. And financial and reputational costs can be significant if something goes wrong. Therefore, the management should take special care not to make any mistakes. But how? Due diligence audit is the answer. And the purpose is as clear as day. Due diligence audit is conducted to:
- Steer clear of a bad business transaction
- Corroborate the transaction whether it adheres to investment or acquisition criteria
- Ascertain the risks and opportunities that comes with a proposed transaction
- Slash the risk of post-transaction disagreeable surprises
- Vet the business affairs as a vigilant business owner
- Bear out all material facts associated with the business
- Verify the too-good-to-be-true deals
- Ensure that the business is what it appears to be
- Foster trust between two independent parties
Due Diligence: Benefits
While a typical audit seeks only to provide an opinion on whether the past financial statements represent a ‘true and fair’ view of the company’s operations, financial due diligence is way beyond bringing myriad advantages to the management and ownership. Not only does the financial due diligence auditor dig into the historical financial performance of the company but the forecast financial performance and its viability under the current business plan as well for the company. Plus, the reasons for any trends noticed in the results of the target company over an appropriate time period are also studied to notify the company about the applicability of the same to the proposed transaction. Not only that but depending upon the scope of the work undertaken a financial due diligence audit:
- Betters the business status.
- Helps unveil any invisible information about the business.
- Functions as a risk appraisal tool for a business.
- Let’s buyers make informed decisions and sidestep surprises at the end of a deal.
- Empowers buyers in ‘caveat emptor’ while ensuring that they are free from defects and fit for purpose.
- Vouches that the buyers ‘get what they pay for’.
- Confirms whether the information provided by the target/seller is reliable.
- Tells if the historical earnings of the target company are sustainable.
- Helps figure out potential future earnings of the target company
- Informs about the possible synergies associated with the proposed acquisition.
- Enlightens about immediate and future tax consequences of the proposed acquisition.
- Informs whether the purchase price is fair (given the results of the due diligence process).
- Conveys about any potential deal breakers (based on the outcome of the due diligence).
- Mentions whether the proposed structure of the acquisition is appropriate.
- Guides the company on including any warranties and guarantees in the legal documentation.
Due Diligence: Types
Due diligence is used majorly in the legal and corporate realms. You might come across four types of due diligence audit in UAE relevant for your business:
Providing end-to-end solution to budding as well as seasoned business owners for almost two decades across the globe, Adam Global is a Dubai-based full-fledged business consultancy firm. We offer a wide array of due diligence audit services across the UAE to help you in making a decision to merge or acquire a company in the UAE to steer clear of any sort of post-transaction upsets. At Adam Global, our approach to assisting businesses address and mitigate the risks involved in dealing with external entities is straightforward – reduce the complexity and keep things as clear as day. We lump together the experience and competencies of our due diligence service providers with the latest tools and technology to provide you with a tailor-made solution that squarely fits your needs. Meeting regulatory obligations, complying with internal risk processes and procedures and better understanding the companies and individuals you may be involved with are the mainstays of our working style. Our team of third-party due diligence professionals can add a further layer of customised research and advice, furnishing their experience and support if you are looking for further in-depth analysis. Case in point: fraud investigation. In such situations, we can draw on an array of tools and sources as well as advise on how to act on the findings of the due diligence. You might want to check out our forensic audit page (link) to learn how we can assist you in this area.
Feel free to contact our professional company formation advisors in Dubai in case you need information about the documentation to be prepared in case of merger transactions.
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