Support for due diligence
While due diligence may not be a topic that sets the heart racing, being able to understand and evaluate a prospective acquisition, buyer or partner is essential to any growing company in today's challenging business environment.
If you're hoping to sell your business, are considering a merger or if you're entering a contract with a new supplier, doing your homework will give you the knowledge and confidence to get what you want from the deal. It shouldn’t just be a rubber-stamping exercise.
Due diligence identifies issues so they can be tackled early on; it can help you establish the true value or cost of a business transaction and the right information can contribute to how the terms of your agreement are drafted. Due diligence should empower you to negotiate the best terms for your firm.
Ultimately, due diligence shouldn't just be focussed on compliance – it's about having confidence in who you do business with and a better understanding of their business.
Types of due diligence
Due diligence falls into three main categories:
- legal due diligence
- financial due diligence
- commercial due diligence.
Although these types are distinct, the best due diligence programmes maintain an element of close-cooperation because the work in one area can often inform the checks being carried out elsewhere.
Legal due diligence seeks to examine the legal basis of a transaction, for example to ensure that a target business holds or can exercise the intellectual property rights that are crucial to the future success of the company. Other areas that would most likely be explored include legal structure, contracts, loans, property, employment and pending litigation.
Financial due diligence focuses on verifying the financial information provided and assessing the underlying performance of the business. Earnings, assets, liabilities, cashflow, debt and management are usually considered.
Commercial due diligence considers the market in which a business sits, for example by having conversations with customers, assessing competitors and creating a fuller analysis of the assumptions that lie behind the business plan. All of this is intended to determine whether the business plan stands up to the realities of the market.
Other types of due diligence cover areas such as taxation, pensions, IT systems and intellectual property.
Planning a due diligence programme
No transaction is identical, so the specific elements that you include in the due diligence process will need to be tailored carefully. The collection of the ICAEW Library & Information Service contains a range of practical guides and checklists that can help you shape a due diligence exercise to fit your needs.
If you would like to request a book or article from the list, please contact the ICAEW Library & Information Service by phone on +44 (0)20 7920 8620, by fax on +44 (0)20 7920 8621 or by email at firstname.lastname@example.org
Help with information gathering
There are many ways that the services on offer from ICAEW can help you undertake your due diligence checks, providing information to support legal, commercial and financial due diligence.
Most services are supplied free of charge to ICAEW members and ACA students.
- Search trade titles using the Business Source Corporate database and get immediate access to articles.
- Find information on industry sectors in our series of Business & Industry Guides, including online access to market research.
- Get economic forecasts for specific countries through our country profiles.
- UK and Irish company reports from the FAME database are available free of charge, providing financial data for ten years. The reports also include details of company status, county court judgments, mortgage data and details of recent filings. Request a search on a company.
- Original company documents for the UK and Ireland are also available free of charge. Please contact the enquiry team direct to make your request.
- Connections reports from EQUIFAX can help you to uncover deliberate attempts to hide company and director linkages, as well as identifying directors with a track record of company failure. Request a search on the current directors of a company (a charge applies for this service).
- Director reports provide a full list of current and past directorships. Reports are produced using the FAME database and are free of charge. Request a report on a director.
- Credit profiles and risk reports from EQUIFAX evaluate a company's credit risk and give you recommended credit limits, payment profiles, gazette data and other detrimental information. Request a credit and risk report (a charge applies for this service).
If you would like assistance finding the information you need, please contact the enquiry team by phone on +44 (0)20 7920 8620, by fax on +44 (0)20 7920 8621 or by email at email@example.com
Conducting due diligence on individuals?
If you are looking to check or verify individuals as part of client account opening procedures, please read ICAEW's anti-money laundering guidance on customer due diligence and advice on electronic client identification resources.
The ICAEW Library & Information Service offers a free client screening service to ICAEW members and ACA students which can check individuals or entities against a variety of watchlists which identify restricted, sanctioned, prohibited and high-risk individuals and businesses. This includes known terrorists, money launderers, fraudsters and politically exposed persons (PEPs).
ICAEW's Technical Enquiries helpline offers advice on all aspects of complying with the Money Laundering Legislation. Our advisors can answer calls concerning the regulations, reporting suspected illegal activity and discuss specific issues anonymously. Telephone +44 (0)1908 248 250.
If you are looking to run searches against individuals to check for fraud , you may wish to consider joining a service such as that offered by the CIFAS National Fraud Database which allows organisations to share data on confirmed cases of fraud.
Can't find what you are looking for?
If you're having trouble finding the information you need, ask the Library & Information Service. Contact us by telephone on +44 (0)20 7920 8620, by web chat or by email at firstname.lastname@example.org.