Acquisition & Vendor Due Diligence

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Due diligence serves to reassure potential buyers or future business partners that their investments and relationships are financially sound and profitable, and there are low levels of associated risk across the entire organisation.

How BDO can help

Our team has a thorough understanding of both the acquisition and vendor due diligence process, and the information required to determine the organisation's overall health. The scope of our work is tailored and agreed to suit the specific circumstances and requirements of a client and/or transaction.

Working with BDO experts across the firm, the team’s due diligence process involves a comprehensive review across six key components: financial, tax, integrity, human resources, risk, ESG and IT due diligence.

Financial due diligence

During the financial due diligence phase, our transaction and valuation teams assess the transaction's risks and opportunities through a process of enquiry, analysis and interpretation.

The team communicates effectively with key stakeholders where applicable to:

  • Review historical and forecast performance of the business to be acquired
  • Assist in determining a range of possible prices for the business
  • Work with your legal adviser to review the sales and purchase agreements (SPA) from a financial viewpoint
  • Provide assistance with preparing the completion accounts for the sale or acquisition

On completion of the acquisition, BDO’s valuation team can assist with allocating (for accounting purposes) the purchase price of various assets and liabilities acquired as part of the transaction (i.e. goodwill, brand, patents, trademarks etc.).

Integrity due diligence

The last thing potential buyers want to discover is that their intended target has reputational issues, serious litigation involvement or is on an international watch list. Complementing our financial due diligence service, the integrity due diligence phase explores the entities behind the numbers.

Through a process of enquiry, our team identifies areas of medium to high risk impacting a transaction.

This process reviews the reputation and integrity of management, key business partners and major shareholders or clients by:  

  • Conducting corporate and personal searches outlining directorships, beneficial ownership, company associations and other corporate intelligence
  • Reviewing subscription, public databases and content aggregators to identify any insolvency or civil litigation records in the current country of residence
  • Reviewing global risk and compliance databases to ensure the company or directors do not feature in reference to key risks such as AML/CTF, fraud, bribery and misconduct
  • Reviewing subscription and public databases to identify any parties subject to domestic or global sanctions, restricted parties on global watch lists and PEP screening on key individuals
  • Conducting targeted media searches to determine any involvement in scandals or public controversy

Further enhanced due diligence may be required subject to the above initial screenings.

Tax due diligence

The aim of a tax due diligence is to understand what tax compliance obligations, liabilities and structures exist and where necessary help is needed to resolve issues before it’s too late. Within the tax due diligence phase, our team identifies the associated tax risks and consequences involved with the transaction, across the areas of income tax, payroll tax, FBT and GST.

The tax landscape is evaluated by:

  • Reviewing the direct and indirect taxes imposed on the target, as well as considering any applicable tax jurisdictions for cross-border operations
  • In an acquisition, assisting the acquirer in determining the most cost effective direct and indirect tax structure/trading arrangements post acquisition
  • In an acquisition, assisting with a review of the sales and purchase agreement (SPA) from a tax viewpoint.

Human resources due diligence

BDO’s human resources due diligence professionals work with key stakeholders to review human capital within the organisation, as well as HR processes, procedures, structures and contracts. Our HR due diligence services include a review in areas including: cultural overview, workforce and talent management structures and risks, human resources policies and controls, legal matters and employment agreements.

Across these service areas, our team assist by:

  • Providing transactional and communication strategies
  • Conducting comprehensive compatibilities assessments (systems, policies, procedures)
  • Offering hands-on tactical integration and deployment processes
  • Providing appropriate human capital alignment with business requirements.

Risk due diligence

BDO draws on a wealth of deep industry experience to help clients make informed business decisions and understand the risk profile of the target. Our professionals perform comprehensive due diligence investigations on individuals and entities in order to alert clients to risk, disclosure issues, and potential areas for negotiation. Our multidisciplinary project team leverage BDO’s global network and technological resources to provide reports uniquely tailored to each client’s individual risk profile and preferences.

Our risk due diligence services include:

  • Assistance reviewing Risk Management Frameworks, including policy, Risk Appetite Statement and Strategic Risk Assessments
  • Legal and regulatory compliance including readiness and compliance reviews e.g. Modern Slavery Act, Privacy Act etc.
  • Internal control reviews (design) e.g. Tax Control Testing Plans
  • Determination of any potential ‘Wage Theft’ issues through Wage Audit
  • Fraud risk assessments
  • IT assurance SOC 1 & SOC 2, IT (General Controls)
  • Cyber framework and diagnostic assessments against best practice
  • Third party cyber assessments.

ESG due diligence

ESG due diligence is the process of uncovering a company's ESG policies and risk factors. This information then assists our clients in making more informed, ethical and less risky investment decisions. ESG due diligence is applied to and is transactionally relevant for both buy-side and sell-side of a transaction, as well as becoming increasingly critical in understanding the impacts of general day-to-day operations of the business.

Buy side services:

  • Awareness on deviating strategic positioning in sustainability management
  • Determination of reputational risks
  • Identification of cost-relevant liability and compliance risks
  • Profit and loss calculation/determination
  • Arguments for price negotiations
  • Determination of value enhancement opportunities

Sell side services:

  • Arguments for price negotiations
  • Determination of value enhancement opportunities
  • Factor for identification of strategic fit with buy side

Operational services:

  • Assessment of existing activities
  • External benchmarking to industry standards and ESG regulatory standards
  • Strategic focus/planning
  • Materiality analysis
  • Decarbonisation and ESG reporting

BDO’s ESG due diligence services ensure clients are fully informed of their ESG/sustainability risks and opportunities. Our services assist to:

  • Consolidate corporate image and reputation
  • Identify cost-relevant liabilities and compliance with ESG regulation
  • Provide argument for price negotiations and valuations
  • Determine reputational risks that influence the company/transactions value
  • Identify, monitor and manage ESG risks correctly
  • Identify and implement value enhancement opportunities
  • Identify issues in the ability to report under mandatory reporting requirements and the acquirer’s chosen sustainability reporting framework.

IT due diligence

IT due diligence is a core component of a transaction as it significantly enhances the quality of valuation analysis, financial modelling and risk mitigation attributable to the transaction or post transaction integration activities. Our team works with business and IT leaders to evaluate a target’s IT strategy, technology footprint, inherent architecture and processes to develop solutions that match the goals of the transaction.

Our IT due diligence services include:

  • Evaluating the target’s IT organisation, inherent structures, IT strategy and system roadmap
  • Conducting comprehensive capability assessments that evaluate the current state of IT systems, processes and infrastructure
  • Review of the target’s IT governance and controls, their core applications, systems and their IT assets and inventory
  • Review IT maturity and risks of various functions and assess alignment with industry benchmarks or business requirements – such as future growth scenarios and remediation
  • Develop strategies that identify opportunities for improvement, customised to an organisation’s needs
  • A budgetary analysis including IT cost benchmarking and cost savings.

Contact us

Contact our team to discuss your needs using the request for service form.
Alternatively, call 1300 138 991 to speak with an adviser in your nearest BDO office.