Investor Due Diligence

The Investor Due Diligence is the essential detailed examination of the business up for sale.

Vendor Due Diligence = VDD

Investor Due Diligence = IDD.

An Investor Due Diligence examination will as a rule cover the following aspects of the business:

For larger companies it is recommended that a Human Due Diligence be carried out.
Staff changes following acquisitions: the investor will normally try to avoid the departure of talent and staff resistance.
Actual situation analysis: the investor consultants should provide information regarding all cultural differences. This may also include inferences relating to future conduct by staff.
Reason for investment: the reason may have an influence on the business culture, though this may not necessarily be the case. It is recommended that not all of the “mechanics” be adjusted immediately after acquiring the business. However, a decisive readjustment may be successful, and avoid creating confusion.

Investor Due Diligence as an actual examination (DD stricto sensu) may be subdivided into:

The focus involves the clarification of faults and the impairment of the subject sold.

Investor Due Diligence is implemented in the following detailed stages:

the creation of an IDD team
preparation (work scheduling)
- procurement of information
- preparation of information documents
- drawing up of checklists
implementation
documentation
- data collection and structuring, including photographic documentation
- appraisal of results of investigation
- issue of report
questioning of vendor
appraisal / IDD report
- according to the Discounted Cashflow Procedure (DCF)
- DCF enables a better insight to be obtained into the business’s value-driving factors
- more comfortable negotiating position

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M & A – Mergers & Acquisitions