Menu
Transaction Advisory Services

Home / Services  / Transaction Advisory Services / Due Diligence

Due Diligence

Financial due diligence as the name suggests is an indepth evaluation of the financial management system of a company. It includes the detailed inspection of the company’s internal control system, financial statements of the company, and document flow. The evaluation also includes management reporting data wherein the handing information about the company’s assets and liabilities, structure of expenses, and profits from primary activities, etc.

The AKM Global financial due diligence services involve assessment of the driving factors of the cash flow and maintainable profits for the company. Our process includes investigating the historical data and the future forecasted result of the entity. This process will uncover the hidden liabilities if any and help the investors or potential buyers to get and understanding of the business trend of the target company.

Due Diligence

Our Services include the following:

Financial Due Diligence inclusions

Our financial due diligence services help the potential buyers or investors to assess and evaluate the factors which could have affected the past performance, and which will enhance the future results of the company. Here are some of the inclusions that are necessary for financial due diligence.

Examination of availability of assets and liabilities:
  • Analyzing the the structure of assets as well as liabilities.
  • Examining the current and non-current assets of the company or business, ascertainment of their value and availability.
Analysis of quality of assets and liabilities:
  • Examining the condition of the assets.
Economic analysis
  • Examining the financial independence of a company.
  • Anaiysing the profits and loss of a company of profits of the enterprise.
  • Examining a company’s financial solvency.
Tax analysis Review of cost and management accounting system
  • Examining policies related to accounting adopted by a company.
  • Ensuring the correctness and veracity of financial statements.
Why Financial Due Diligence is required?
  • Issues that could come up later on during the transaction can be dealt with in advance with the help of financial due diligence.
  • An informed decision/negotiation can be taken when both the parties are in tune with the financial position of each other.
  • Financial due diligence provides flexibility in the use of deliverables.
  • An unbiased opinion from third party helps in enhanced trust for both the parties.
  • The potential future position of the entity can be ascertained which will be a crucial deal maker or breaker for both the entities.

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

How can AKM Global helps in Financial Due Diligence :-

We are a renowned CA Firm in India (Gurgaon) delivering quality financial due diligence services to our client. We focus on the strength and potential growth factors shown by the entity while identifying the risks if any to make the entity in a stronger position while negotiating the deal. We work in partnership with the industry specialists such as legal and tax experts etc. to provide a comprehensive and integrated solution.

  • Assist our clients in the formulation and execution of an effective due diligence policy.
  • Assist on transactions from small size to big-size, crucial and complex transactions, from domestic to international deals etc. Early risk detection.
  • Review of areas of earnings by reported/proposed EBITDA by the management.
  • Identification and continuous monitoring of crucial areas of cash flow. Eg Debt.
  • Analysis of past trends of working capital of the company.

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.