Due Diligence For Transactions - ICSI

1y ago
695.92 KB
26 Pages
Last View : 6d ago
Last Download : 5m ago
Upload by : Joanna Keil

Due Diligence g For Transactions 1

A Agenda d Introduction: Objective and Purpose Due Diligence V Audit Need of Due Diligence Scope of Due Diligence Approach Report Conclusion PwC 2

IIntroduction: t d ti Obj ti Objectives Manage Risk Prevents Unpleasant p Surprises p Enabler in Negotiation Value Protection Facilitates Decision Making PwC 3

Due Diligence vs Audit Due Diligence Audit Business Understanding to Investor Purpose Report to shareholders/ Accounts users Prior to Transaction Timing Annual Closing Comfort / Transaction focussed Opinion/ Report True and Fair Industry Standards & Deal Drivers Governing Rule Companies Act / AS Effect on Transaction Drivers Controlled Access PwC Eff Effect Access Effect on Profitability / net assets / reporting / disclosures Full Access 4

Purpose : Buy Side Vs Sell Side Due Diligence? Are you buying what you think you are buying? Buy Side Due Diligence Assist the buyer maximise his return on the deal Do you know the issues a potential buyer may negotiate on? Sell Side Due Diligence Assist the Vendor / Seller get the best value on the deal

SCOPE OF DUE DILIGENCE Scope of Due Diligence varies depending upon the kind of Transaction Unlike a statutory audit, there is no defined law / process by which the due diligence has to be conducted, it has evolved by practice and requirements of the transaction A T A. Typically, i ll in i a 100% % acquisition i i i off shares, h J i Ventures, Joint V P Private i Equity E i Transactions, the following is the scope of coverage of the due diligence exercise ¾ Background and business overview of the target company ¾ Constitutional Documents and Corporate Records ¾ Share Capital – Clear title of shares to be acquired ¾ Details of the directors, auditors and bankers ¾ Corporate Governance ¾ Details of Shareholders ¾ Agreements and Contracts PwC 6

SCOPE OF DUE DILIGENCE Contd. ¾ Licences and Approvals ¾ Properties – Owned and Leased ¾ Financial and Taxation records ¾ Exchange g Control ((FEMA aspects) p ) ¾ Loans and Borrowings and Guarantees extended ¾ Investments ¾ Intellectual I t ll t l Properties P ti ¾ Litigations ¾ Employees and Personnel ¾ Insurance Coverage ¾ Miscellaneous PwC 7

SCOPE OF DUE DILIGENCE B. In case of an Asset acquisition / Business / Undertaking acquisition Contd. IIn such h acquisitions, i iti th focus the f i the is th on Asset(s) A t( ) / Business B i / Undertaking to be acquired instead of the Company / its shares ¾ Assets – their title and ownership ¾ Encumbrances on the assets ¾ Agreements and Contracts – related to assets ¾ Approvals with respect to the use of the assets ¾ Intellectual ll l Property ¾ Litigation on the use and ownership of the assets ¾ Employee Matters, Trade Union and Labour ¾ Health, Safety and Environment Laws ¾ Insurance Coverage on assets PwC 8

SCOPE OF DUE DILIGENCE C. Specific caution in case of due diligence of a listed company Contd. ¾ Confidentiality Agreement / Non-Disclosure Agreement is executed with the parties involved in the transaction ¾ Standstill provisions to be agreed with various parties – restricting them from dealing in shares of the listed company while in possession of unpublished price sensitive information ¾ Generally, no disclosure to the stock exchanges when the due diligence is undertaken ¾ Disclosure to stock exchanges when the transaction is finalised and executed ¾ Dissemination of confidential information to the exchanges before closing the deal PwC 9

SCOPE OF DUE DILIGENCE D. FCA and Anti-Corruption Issues Contd. ¾ Mostly required by MNC (US Companies) as significant portion of the due diligence ¾ FCPA allows for payments (speed money / facilitation payment) made to government official for routine with requisite disclosures ¾ Prevention of Corruption Act, 1988 is stringent in India and prescribe for imprisonment and penalties for offences committed under the law . Does not permit any form of payment, not even facilitation payment ¾ These payments are difficult to track – they are mostly unrecorded ¾ Even if tracked the reason for these payment informed that these payments are quite prevalent PwC 10

SCOPE OF DUE DILIGENCE E. Specific and Industry Focused Areas of Diligence Contd. ¾ Telecom l ¾ Information Technology ¾ Export Oriented Units ¾ Healthcare ¾ Metals & Mining ¾ Insurance PwC 11

PROCESS PRE-DUE PRE DUE DILIGENCE Step-1 Agree with the Client on Scope and Timelines Scope - Areas to be covered - Manner of maintenance and collection of data - Final work product Due Diligence Report Only Executive Summary Comprehensive Bible with Executive Summary, detailed report on all segments, data sheets Timelines - PwC p Time within which the exercise is to be complete 12

PROCESS PRE-DUE PRE DUE DILIGENCE Step-2 Getting Ready Obtain copies of Information Memorandum, MOU, draft transaction documents, if any. Draw up your wish list / checklist for circulation to Target and team Circulate information, if any, about the transaction including available documents t the to th team, t di id up responsibilities divide ibiliti Identify major issues concerning the transaction Set out process and expectations PwC 13

PROCESS PRE-DUE PRE DUE DILIGENCE Step-2 Getting Ready Pick the members of the Team based on expertise required for the various components of the due diligence Assess whether you need any outside consultant / expert for any aspect, e.g. labor related issues, real estate issues Make sure that the consultant has the same level of transaction overview as the rest of the Team and understands the scope of his work clearly In case a Non-Disclosure Agreement is to be executed by the client ensure that the consultant executes the same Read all documents circulated relating to the transaction very carefully Read up on industry and regulatory issues that may be relevant to the Transaction Identify d if specific ifi iissues that h may b be relevant l PwC 14

PROCESS PRE-DUE PRE DUE DILIGENCE Step-2 Getting Ready Pre-diligence Deliberative Overview Prior to commencement of the process, an overview of issues considered to be of significance for the successful execution of the Transaction are normally deliberated upon between the Acquirer and Target representatives and their respective accountants and legal and business advisers This p pre-diligence g deliberative overview stage g is off critical significance g f as it sets out the basis for setting out the scope and intensity of the due diligence process specific to the contemplated Transaction at hand PwC 15

PROCESS PRE-DUE PRE DUE DILIGENCE Step-2 Getting Ready Components of the Deliberative Overview Transaction Structure i.e. concerned parties, whether structured as share or asset purchase, tax considerations, restrictive covenants, etc.; Transaction Funding i.e. how is funding contemplated and preliminary consideration of any significant issues in respect thereof; Regulatory g y Issues such as restriction on fforeign g holding, g, subsidiaries,, approvals, competition law issues and foreign exchange considerations; International Aspects including the question of engaging overseas professional advisers; Timelines i.e. determination of time schedules for various stages of the contemplated Transaction; Confidentiality f y Agreements g i.e. whether Target g seeks p powers to restrict the release of certain information or data and review of covenants in relation thereto (Particularly in a listed company);

PROCESS PRE-DUE PRE DUE DILIGENCE Step-2 Getting Ready Components of the Deliberative Overview Exclusivity or Lock-In Arrangements as per negotiations between the p parties; ; Data Room Guidelines regarding the due diligence process on Target entity; Overall Due Diligence Strategy and consideration of the due diligence checklist as is usually circulated prior thereto; and Specialized Issues such as industry-segment and relevant sector-specific issues including any specialized legislative requirements and such other details.

DUE DILIGENCE PROCESS Constituents of the Process Two separate aspects of the due diligence process: – Formal Process Review and analysis of data provided in the form of documents Review and analysis based on interviews with representatives of the Target to get clarity on the missing links – Informal Process Significant information regarding the Target is obtained through di discussions, i informal i f l meetings i with i hk key persons off the h Target

POST DUE DILIGENCE Preparation of the Due Diligence Report – Upon formal completion of the due diligence process, the due diligence Team usually finalizes the due diligence report – The due diligence report must seek to provide the most pertinent information at a given i point i iin time i iin the h most easily il absorbed b b d fform possible ibl – It is particularly critical to relate the due diligence report to the strategic objectives of the due diligence process. – The due diligence report is to be shared inter se the Acquirer and its legal and business advisers – Although lh h a fi finall report iis usually ll fi finalized li d after f all ll d due dili diligence iinvestigations i i are completed however negotiation process benefits from frequent interim feedback especially in the context of any adverse factors coming to light

POST DUE DILIGENCE Constituent Sections of the Due Diligence Report The due diligence report is usually prepared on the basis of terms of reference as as agreed with the client The due diligence report would typically consist of the following three sections: – Executive Summary: This draws to the attention of the Acquirer, any items of concern or otherwise requiring attention and could usually start with the most critical points or deal breakers – Main Body: This would ideally follow the order and headings of the terms of reference or the checklist – Appendices: This section includes data sheets and/or documentation which are relevant to a critical issue

NOTE OF CONCLUSION Due diligence enables negotiating team in a transaction to take on critical decisions pertaining to the said transaction Accordingly, the process allows negotiating team to strategize the course of action and terms of negotiations going forward Strategies St t i for f Acquirer A i on the th basis b i off findings fi di off the th due d diligence dili process include i l d the th following: – Requiring certain adverse factors to be remedied prior to closing of the Transaction – Seeking specific representation and warranties and providing for indemnification thereof – due diligence is not an exception to the representation and warranties – Negotiating more favorable terms such as reduction in price, trade-offs against matters already conceded to Target, retention of part of purchase price to improve cash flow of Acquirer; and deferral of purchase price – D Drawing i up certain t i conditions diti precedent d t and d conditions diti subsequent b t to t the th transaction

NOTE OF CONCLUSION – Restructuring Transaction altogether for example from a share purchase to an asset acquisition – Obtaining financial guarantee from a more solvent third party as compared to the Target – “Walking “W lki away”” from f negotiations, i i which hi h may be b necessary where h There are adverse factors of such magnitude that adequate compensation or protection would not be feasible The Acquirer does not trust the Target and has calculated that the maximum potential disadvantages are too high – Due diligence further identifies potential deal breakers enabling Acquirer to deliberate and focus upon the same during the course of negotiations – Due diligence additionally provides critical inputs on trustworthiness of Target

NOTE OF CONCLUSION – Due diligence most importantly allows Acquirer to determine whether proposed approach regarding Transaction fits within original strategic objectives of Acquirer – Due diligence constitutes a critical component of corporate transactions per se and the determinative basis of steps taken subsequent thereto for execution of such transactions.

NOTE OF CONCLUSION PwC Keeping in mind clearly the objectives of the transaction Expectations of the Client Cordial relation with the Target, its advisors and representatives Excellent team work – follow the team leader Adherence to the timelines Professional etiquettes Managing stress Providing timely inputs to the negotiating team as and when required 24

Section 6 – In Nutshell. On a lighter note. “Behind every great business deal is a Due Diligence advisor d advising d against it““

Thank a k You ou fo for your you atte attention tio pankaj tewari@in pwc com pankaj.tewari@in.pwc.com PwC 26

finalizes the due diligence report - The due diligence report must seek to prov ide the most pertinent information at a gi i i i i h il b bd f ibliven point in time in the most easily absorbed form possible - It is particularly critical to relate the due diligence report to the strategic objectives of the due diligence process.

Related Documents:

RGF Due Diligence Engagement Template Terms . 1 Introduction The [Applicant] is required to submit to BIS a Due Diligence report prepared by the Due Diligence Service Provider which covers the scope of the Due Diligence work set out in Appendix 7 of the Conditional Grant Offer Letter (the "Due Diligence report"). These termsof engagement set

5. Anti-bribery due diligence starts sufficiently early in the due diligence process to allow adequate due diligence to be carried out and for the findings to influence the outcome of the negotiations or stimulate further review if necessary. 6. The partners or board provide commitment and oversight to the due diligence reviews.

Section 01 - Legal Due Diligence 04 1.1 Purpose of Legal Due Diligence 05 1.2 Conclusion 1 4 Section 02 - Finance Due Diligence 1 5 2.1 Purpose of Finance Due Diligence 1 6 2.2 Conclusion 2 8 Annexure 2 9 Annexure 01 - Statement of Comprehensive Income 30 Annexure 02 - Statement of Financial Position 31

Phase 1 is concerned with the basics of due diligence with a focus on tools and techniques of due diligence analysis. Day One: The basics of due diligence in the oil and gas business The changing dynamics of the global oil and gas business The strategic relevance of due diligence in market analysis

§ 1.03[1] DUE DILIGENCE 1-8 § 1.03 Benefits of the Due Diligence Investigation If not carefully conceived and managed, due diligence investiga-tions can become expensive boondoggles that never end and never lead anywhere. It should be kept in mind that process without results is useless. The due diligence investigation is all about producing .

Bruksanvisning för bilstereo . Bruksanvisning for bilstereo . Instrukcja obsługi samochodowego odtwarzacza stereo . Operating Instructions for Car Stereo . 610-104 . SV . Bruksanvisning i original

The due diligence is a vital - but not always attractive - part of an Oil & Gas transaction. The method to conduct a due diligence has shifted from physical data rooms to Online due diligence (ODD). The reasons are obvious: Flexibility to give global access to bidder parties in a short time frame Efficiency increased for all parties through .

BUKU AJAR KEPERAWATAN DASAR 2 DESKRIPSI SINGKAT MATA KULIAH Fokus mata ajar ini membahas tentang konsep komunikasi terapeutik antara perawat dengan klien dalam berbagai tatanan pelayanan kesehatan pada berbagai kelompok usia tumbuh kembang. Tujuan mata kuliah ini agar peserta didik memahami konsep dasar komunikasi terapeutik, merancang, dan mengaplikasikan komunikasi terapeutik pada berbagai .