Importance and Benefits of Due Diligence in Business Transactions
Due diligence is required while evaluating or making an investment in a company or a project. A good due diligence goes beyond the numbers and aims to analyze what lies behind these. It helps in:
- Identifying issues related to transactions, facilitating early tackling.
- Confirm all material facts related to the business.
- Assess the risks and opportunities of a proposed transaction.
- Reduce the risk of unpleasant surprises post-transaction.
- Create a trust between two unrelated parties.
- Verify that the transaction complies with investment or acquisition criteria.
- Establishing of true value or cost of a business transaction.
- Empowering investor to negotiate the best terms during transactions
Our expert team of professionals having past experience in large set of clients, shall help you
Financial & Accounting Due Diligences.
Strategic Due Diligence
IT / System Due Diligence
Operational Due Diligence including
Human Resources – review processes, outsource providers.
Internal Controls Diligence
Risk Management – assess target profile and risk focus areas
Regulatory / Compliance diligence.
Legal & Tax Due Diligence
Steps Involved in Conducting a Comprehensive Due Diligence
01.
Conducting regular risk assessments
02.
Obtaining and analyzing preliminary information from the target company – this would include historical financials, recent management financials, business plans, information on banking and liabilities, information on operations, assets, employees etc.
03.
Understanding key transaction drivers.
04.
Conducting interviews, review policies and procedures.
05.
Onsite assessment and detailed walkthroughs where necessary.
06.
Discussions with key management personnel to validate findings.
07.
Analyzing the implications of key findings.
08.
Issuing of a Due Diligence report.
Accurate Business Valuation for Fair Enterprise Assessment
In order to get a fair value for your shares, it is important to arrive at a realistic value for your enterprise. A properly computed business value must be based on the right assumptions and forecasts. It must also use suitable industry benchmarks and comparisons. This will ensure that the valuation computed is not only good for the seller but also something which a buyer will be willing to pay for. Our business valuation team helps companies and investors in Dubai and other emirates in the UAE in determining the enterprise value and supporting them through the transaction. To achieve this, we perform Physical Verification, provide strategic Risk Advisory, and offer expert Business Consultancy services. At the same time, we ensure that all operations comply with regulations through AML Compliances, helping you make accurate and secure business decisions.
Business Valuation Methods Used by Our Expert Team
Our business valuation team helps companies and investors in Dubai and other emirates in the UAE in determining the enterprise value and supporting them through the transaction. We use different valuation methods and normally, any one of the methods or a combination of these are used based on our judgment and availability of data:
Income Approach (Discounted Cash Flow Method)
In this technique, we estimate future cash flows for the businesses, the time frame for these cash flows, and the projected free cash from operations are discounted at the weighted average cost of capital. The sum of such discounted free cash flows combined with other considerations like the perpetuity growth rate of the business and terminal capex helps to arrive at the value of the business .
Market Approach (Market comparable)
In this approach, data from comparable transactions – ideally within the same sector and the same region is used in order to arrive at valuations that have been obtained for companies. This approach can be used in a stand-alone manner only if there are such comparable transactions that have occurred in the recent past and also if there is reliable data available for these transactions in order to perform a meaningful analysis.
Asset Approach (Net Asset Value)
This approach involves the actual verification of assets in the entity and the computation of the value of these assets. This is applicable when the realizable value of assets is significantly high. We apply this method in the case of asset-heavy valuations and work with qualified technical valuers.
Key Factors Influencing Accurate Enterprise Valuation
Beside the different valuation techniques, real value of an Enterprise can only be arrived based on various other factors such as the fundamentals of the Business Model, the Management Team, the key Value Propositions that the business offers, its consumer base, etc. Our valuation team hence lays emphasis on understanding the business model and working together with the client management team to validate their strategic business plans as well as the key assumptions and risks involved. This will ensure that the valuation which is arrived is realistic and acceptable to any interested third party.
Step-by-Step Process for Determining Enterprise Value
Analysis of business profile
Study of historical financials
Obtaining insight into markets
Selection of valuation methods
Discussion on business projections
Validation of assumptions used for the projections
Computation of Enterprise value
The Importance of Feasibility Studies in Project Planning
Organizations utilize feasibility studies to identify possible negative and positive outcomes from a project. This is done before investing valuable money and time for it. A properly researched and executed feasibility study is capable of clearly identifying possible issues that can arise when a project is implemented, understanding financial, operational, and other potential organizational impacts. It determines if the project will be productive after considering all the influencing factors. Additionally, our services such as Tax Services, VAT Services, and guidance from our Tax Firm help ensure that financial and regulatory considerations are fully addressed during feasibility analysis.
Key Components of a Comprehensive Feasibility Study
Project Overview
An outline of the project, products / services offered, the business model and method of delivery.
Market feasibility
Defines the prospective buyers, competitors, industry, the future and current market potential and sales estimations.
Technical feasibility
Lists the data about product or service delivery, which could include labour, raw materials. transportation, technology needed, business locations etc
Financial feasibility
A forecast plan about the funding required, the type of funds, and projected P&L, Balance Sheet, Cash Flows etc. This includes detailing the assumptions made in the study, sensitivity analysis, and graphical presentation of key financial data.
Organizational feasibility
An explanation of the corporate and legal frame of the company; this might include data about the founders, their professional history and skills they have that can help the company begin and continue the operations.
We will help you assess your chances of success and our engagement will provide the confidence that your investors will need to participate in your ventures.
01.
We focus on your business model, customers, are familiar with technology and have an excellent understanding of complex data. Their skills include clear communication, multitasking, organizational skills, as well as analytical, observational and critical thinking.
02.
We conduct market research independently, with our own resources and work with leading market research firms in the UAE to obtain authentic market data, which, in turn, forms the foundation of a good feasibility study.
03.
Our deliverables to clients are in the form of exhaustive reports and presentations, which are backed by detailed financial models developed using spreadsheets. We also develop summarized project teaser documents that potential investors might like to review before making further decisions of investments.
Financial Restructuring and Optimization for Business Growth
As business grows, the financial requirements increase adding into one or more mode of finance in the business for its smooth functioning. There may also be the need for disposal of certain assets post re-financing, to lower debt to an acceptable level.
Recommendations to restructure the finance & legal structure, systems, internal policies and procedures may also lead to further strengthening internal controls, streamlining operations, capture synergies, reduction of costs, thus leveraging on new credit facilities.
We can assist in renegotiating bank credit lines at lower costs with longer tenors (for financing of assets, working capital, terms loans and/or revolving credit lines) and search for an equity investor. We support our clients in:
To help businesses plan better and negotiate as buyers and/or sellers, to ensure that all the financial, legal and commercial aspects and the information exchanged is duly verified and validated.
A set of procedures used to estimate the economic value of an owner’s interest in any company. The values conclusions are derived through robust financial modelling techniques and are based on a going concern premise, business assumptions and certain other variable factors.
To ensure proper planning of how a company manages and grows the business, re-emphasizing its culture, mission, values, strategy over a period of 5-7 years.
A lot of research, analyses and marketing skills contribute to acquiring/merging an existing business or starting a new venture. It is valued based on the financial projections, Weighted Average Cost of Capital (WACC) discount rate and other intangible elements attached to the acquisition/ merger varying from business to business.
Shradha Dingliwal | Senior Manager
Call for Consultation
Compliances Services Dubai, UAE.
Scope of Risk Advisory Services in the UAE
ETAA Ease Tax & Accounting Advisory
Frequently Asked Questions About Transaction Advisory
Why do I need Compliance Services?
Compliance is critical to safeguard your business from legal risks, financial penalties, and reputational damage. By ensuring your organization adheres to relevant regulations and industry standards, you protect your business from non-compliance issues, which could harm your operations and stakeholders.
How do you help with compliance?
We start by performing a thorough compliance audit to identify any gaps or risks in your current processes. Then, we work with you to create a customized compliance strategy that covers relevant regulations. We assist with policy creation, employee training, implementation of compliance frameworks, and provide ongoing monitoring to ensure continued adherence.
How can I ensure ongoing compliance?
We offer continuous compliance monitoring and support, which includes regular audits, updates to your policies based on changing regulations, and training for your employees. We can also provide a compliance management system (CMS) to automate and streamline compliance tasks, helping to stay on top of any evolving requirements.
