Using the UNITY framework, let's explore a specific scenario that may keep you up at night...
Scenario
You are considering acquiring another company and need support regarding due diligence activities to assess the target's financial health, legal compliance, and operational efficiency.
This part is easy. Just don't miss anything and you're good.
Understand the client's specific objectives and acquisition criteria, including financial performance targets, strategic fit, and risk tolerance.
Define the scope of the due diligence assessment, identifying key areas to examine, such as financials, legal documentation, and operational processes.
Define the scope of the valuation assessment, specifying the valuation methods and key assumptions to be used.
Identify relevant regulatory and compliance requirements that must be adhered to during the due diligence process.
Assess potential risks associated with the acquisition, including financial liabilities, valuation process, legal disputes, and operational challenges.
Develop a detailed due diligence plan outlining the specific procedures, data sources, and evaluation criteria for each focus area.
Collect financial statements, legal documents, and operational records from the target company and relevant third parties.
Assemble a team of experts, including financial analysts, legal experts, and industry specialists, to conduct the due diligence.
Identify and implement technology solutions and tools to support data analysis and document review efficiently.
Develop a risk mitigation plan for addressing potential issues identified during due diligence.
Choose the appropriate valuation methodologies, such as DCF analysis, CCA, or asset-based approaches, based on the target company's characteristics and industry norms.
Develop a robust valuation model, applying chosen methodologies and assumptions.
Perform sensitivity analysis to assess the impact of varying assumptions on the valuation results.
Conduct a comprehensive financial analysis, including reviewing income statements, balance sheets, cash flow statements, and financial forecasts.
Assess operational processes, identifying areas of efficiency, potential bottlenecks, and opportunities for improvement.
Analyze the collected data and findings, highlighting key insights and areas of concern.
Prepare a detailed due diligence report presenting findings, recommendations, and risk assessments.
Based on valuation results, advise the client on negotiation strategies, including setting initial offer prices, assessing potential deal structures, and determining negotiation tactics.
