Fact finding

Report -acquire report and will

Due diligence engagement use to offer purchase
price; or
-retract offer
Co. A (acquire/purchaser)

Co. B (target)

Either :
Acquire perform DD (internal DD)
Firm perform DD (external DD)
On behalf of acquirer : financial DD
On behalf of target : Vendor DD

Benefits of external DD
1. External DD provider will be more independent in providing information relating to the
target (both +ve and -ve) as they are not involved in the acquisition decision.
2. External DD provider cann do a better job as they have extensive exposure in performing
DD services to many clients.
3. Mgmt. of client can focus managing their biz activities rather than involved in DD activities
which are not their expertise

DUE DELIGENCE FOCUSES ON FACTS FINDINGS

- gather as much information as you can to help client make decision

Purpose & Benefit of DD to the acquirer

1. Information gathering (facts findings)
exam question a. Gather as much info as possible
b. To assist the client in their decision making on the potential acquisition

2. Verify target co representations / statement

a. Verify all info provided by mgmt especially when the mgmt. may try to push the
sales by only emphasizing positive facts
3. Identify all asset and liabilities of the company
a. Confirm existence, completeness, valuation and right & obligation of asset and
liabilities
b. Asset – Liabilities = Net asset = Purchase price
c. Identification assets & liabilities are not limited to those in FS only
4. Identification of any operational issues
a. Perform visit and background research of the company
b. Assist the client to plan ahead for any potential operational issues
i. Eg “ acquiring owner managed biz
 Acquirer should discuss w owner to become the employee
and plan for transition of leadership
ii. Some operational issues can affect forecast result – nego PP
Non assurance engagement
-does not provide opinion @ conclusion issued
(if review, means got opinion)
- fact finding