Reliable data that build your investors’ trust

Due diligence audit – when should it be conducted?

Conducting due diligence is necessary in the case of large capital transactions. These include mergers, acquisitions, expropriations, sales of shares and stocks, debt relief or the purchase of an entire company. Such action guarantees the transparency of the company and inspires investor confidence. Specific data and comprehensive information allow for the streamlining of the transaction process.

What does due diligence analysis cover?

Due diligence analysis covers every area of an enterprise’s operations. Its main purpose is to assess the risks associated with the investment and to develop a negotiation strategy with the counterparty. Therefore, the following must be done, among other things:

• Financial analysis

• Legal analysis

• Real estate analysis

• Technical analysis

In some cases, it may also be necessary to assess the ethical and moral aspects of the company’s operations and the efficiency of information flow. A due diligence audit is not only a verification of documents but also a visit to the company’s headquarters and interviews with employees and partners.

Enterprise valuation – what does it mean?

Company valuation, i.e. determining the actual value of an enterprise, involves analysing financial data using specialised methods. This takes into account the legal aspects of running a company, its financial situation and tax burdens. It’s also necessary to determine the purpose of the valuation, as this determines which tools should be used.

Company valuation – when is it necessary?

Companies are most often valued when they receive an offer to purchase the enterprise. In such cases, a reliable valuation forms the basis for negotiations – it must be supported by facts and specific data. Valuation is also required by law in the case of:

• Takeovers

• Mergers

• Legal restructuring

• Share buybacks

Valuation is also useful when applying for investment financing. For example, banks treat it as the basis for issuing a credit decision.

Enterprise valuation – what is it?

The process of valuing a company consists of several stages. Once the objective has been defined and the appropriate tools selected, a list of necessary information should be compiled. Based on this list, data are collected and then subjected to detailed analysis. The condition of the industry, economic trends and the company’s prospects are assessed. The conclusions are presented in the form of a valuation report.

Company valuation for the purpose of a transaction

There are many methods for valuing an enterprise. The most commonly used approaches are:

• Income-based – based on a forecast of future income from operations

• Asset-based – determines the value of the company on the basis of its assets

• Comparative – involves comparing the company with other companies conducting similar activities

Each of these methods yields different results, so choosing the right one is crucial. A popular solution is to use multiple approaches simultaneously to get a comprehensive picture of the potential value of the enterprise.

Business valuation with Redegate experts

Both company valuation and due diligence are time-consuming processes that require extensive knowledge and precision. Important investment decisions are made based on their results, so there is no room for errors. It is best to entrust the comprehensive assessment of an enterprise’s condition and worth to experienced specialists who know what to look for. Redegate’s financial experts have many years of experience, which allows them to select the best methods and tools for a given company’s situation. We invite you to contact us.