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Transaction Advisory Services

Due Diligence

In order to make an informed decision and obtain desired results from a transaction, it is important to gather information about a target company – its business and environment in which it operates.

There is dire need to mitigate overall transaction risk through the identification, quantification and substantiation of value drivers or value inhibitors, and to recognize the differences, if any, between these and what was the basis of anticipated deal value at the beginning of the process. We assist the client in conducting due diligence before entering into any transaction and assist them in gaining holistic view of the factors including financial, commercial and taxation  that may impact the material business of the entity.

Our Services include the following:

Financial Due Diligence (FDD):

Our experts go beyond the traditional audit and look at business from a commercial perspective. Under Financial Due Diligence, they investigate into the financial affairs that have a material impact on the prospects of the target business. The intent is to identify, quantify and substantiate value drivers or value inhibitors of the proposed transaction.

We do Buy Side as well as Sell Side Due Diligence

Buy Side Due Diligence helps in

  • Providing valuable insight into the operations of the company
  • Structuring and valuing the transaction, Negotiating purchase price and purchase agreements
  • Determining future financing strategies
  • Identifying operational areas upon which to concentrate after the deal closes
  • Assist in determining where the value in the company is and where the “black holes” aree

Some key questions which we help answer for the client are

  • What are the quality of historical earnings and risks in achieving the projections?
  • What are the current and projected WC requirements of the business?
  • What are the risks that the numbers are not right?
  • What is the accuracy of provisions in the balance sheet?
  • What are the off balance sheet liabilities?

Sell Side Financial / Vendor Due Diligence helps

  • Negotiate the best deal
  • Allows greater competition
  • Retain control of negotiation
  • Suited to the process where multiple bidders or investors are involved
  • Meet the timelines
  • No surprises/“black holes”
  • Reduces strain on management
  • Reduces disruption to business operations
  • Minimum post-completion and separation issues

Tax Due Diligence (TDD):

Tax Due Diligence helps in reducing the risk of acquiring unseen tax liabilities and risk exposures associated with such transaction. Tax Due Diligence is important due to the following reasons

  • Identification of any material tax exposures
  • Validating representations made by the seller
  • Validating assumptions in valuation of buyer
  • Structuring deal in a tax efficient manner
  • Identifying tax saving opportunities
  • Understanding the target

Typical direct tax issues which arise in due diligences are

  • Penalty and Interest exposure
  • Withholding tax implications
  • Transfer Pricing implications
  • Tax exposure on account of business reorganization in the past like merger, demerger, capital restructuring, etc
  • Analysis of carry forward of losses after the transaction
  • Analysis of availability of tax holidays after the transaction
  • Analysis of tax positions on deductions and exemptions claimed
  • MAT credit entitlement
  • Tax litigation

Typical Direct Tax issues which arise in Due Diligences are:

Service Tax

  • Non-payment of service tax under reverse charge as a receipient
  • Input service distribution
  • Availment and utilization of CENVAT
  • Services not qualifying as Export
  • Service tax on reimbursements
  • Payments to related parties

VAT/CST

  • Incorrect classification of goods
  • Non deduction of withholding related to Work Contract Tax
  • Incorrect availment of input tax credits
  • Pending Status or lost statutory forms

Excise

  • Incorrect classification of goods
  • Issues in area based exemptions
  • Valuation of supplies to related entities
  • Availment of CENVAT credit in relation to trading and exempted activity

Miscellaneous Issues

  • Imports from related parties without Special Valuation Bench order
  • Issues in availment of benefits under the Foreign Trade Policy and related compliances
  • Non-payment of Entry tax/Octroi/LBT
  • Non fulfillment of incentive conditions

Legal Due Diligence (LDD):

Though our in house counsels and external counsels we are well equipped to carry out the legal due diligence. For an investor a legal due diligence is crucial for decision making. It helps in determining liabilities, negotiating a lower price and managing risk of in a complex country like India. The exercise covers various aspects like Corporate Laws, Loans and Borrowings, Real Estate, Intellectual Property, Contracts, Employment, Licenses, Litigation, Competition Law, etc

Typically, a legal due diligence is a study of the Target, focusing on the following:

  • Regulatory issues
  • Corporate compliances
  • Verifying Loan documents to check for any restrictions on M&A
  • Title over Real Estate and other tangible property
  • Title over Intellectual Property and the risks associated with it
  • Compliance with Employment Laws
  • Existing or potential litigation against the target
  • Licenses and regulatory approvals required for the Business
  • Compliance with environment and other industrial laws
  • Material Contracts

Investigative Due Diligence

Thought our close tie ups with Corporate Investigators we offer Investigative Due Diligence ion the target company. Information is typically gathered in a discreet way through partners, social media, journalists, investors, friends and family, litigation records, corporate records, etc.

This involves the following

  • Reputational due diligence on the target company, promoters, etc in a discreet way
  • Due diligence which is aimed at anti-bribery, corruption, ethics and integrity.
  • Anti-bribery, corruption, ethics and integrity of the target companies are the biggest concerns for foreign acquirers.
  • Post-transactional issues are investigated as well

We also conduct due diligence on Start-ups for Venture Capital Funds.