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| 26.06.13 |

The due diligence process shows what makes a company tick

Making an assessment of a third-party company is no easy task: The seller will present his business in the best possible light to thus achieve a high price - the buyer, on the contrary, wants to fully understand all possible risks involved and pay a low purchase price.

Those who will rely in such a situation on a due diligence - a risk assessment carried out with due care - is right on target. The objective of the due diligence is getting to know about the risks. Martin Borsik, managing director of VeMEMaS GmbH: “After carrying out the analysis, all parties involved will know where adjustments or changes have to be made in the merging companies so that later on things will run smoothly. “This will simplify the decision to buy, carry out contract amendments, if need be, or to withdraw from the purchase offer.

Which aspects are especially included in the due diligence will be agreed beforehand. “The creditworthiness of the customers is examined, for example - of course without mentioning names“, explains Martin Borsik. This covers, for example, strategy subjects, the financial situation, fiscal and personnel issues, environmental aspects, operating premises and contract management - more or less everything which is assessed as high risk.“

Within the framework of this analysis, it will become apparent as well how the processes in a company and the usual decision-taking paths are structured, what determines the management style and how the internal and external relationship networks are organized. Knowing about these patterns and structures is a good basis for a well-functioning merger of companies or parts of companies.

Entirely in line with “the best of both!“, integration planning has to take place already prior to the merger. “This cannot be done without incurring costs“, knows Martin Borsik and states the following: “The amount invested for integration corresponds more or less once again to the purchase price. One third of this has to be spent on the own workforce: ambiguities at employee level simply have to be eliminated - which is a human thing to do.“

The second third will usually flow into shaping the process by management: Clarity is needed in this respect - therefore smaller or larger restructuring measures or new processes have to be implemented.

The last third is spent on external consultants. It is their task to keep track of things, put the focus on important issues, motivate, advance pending tasks or finalize them and make available external competences and temporary resources.

The purchase price of a company is only paying off if the success of the company sold - measured in terms of earnings figures, growth stock and customer satisfaction - is maintained AND the existing business of the buyer improves in addition to this.



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