Acquiring another company can be a great way to drive growth – whether that’s expanding into new markets, strengthening your competitive position, or adding new capabilities.
But for many business leaders, the process can be unfamiliar territory. Without the right advice, it can quickly become complex, time-consuming, and expensive, not to mention high-risk if professional advice has not been received. In this article, Danny Malone, Corporate Finance Senior Manager at UNW, explores some of the key areas to focus on and how the right advice, covering due diligence and corporate finance support, can make all the difference.
What role does due diligence play?
Due diligence is a fundamental step in any acquisition process. While financial and tax due diligence is typically at the heart of this – providing a detailed, independent assessment of the target business’s financial health that potentially underpins any valuation and offers valuable insights that can shape negotiations – it’s important to acknowledge the wider picture. Depending on the nature of the business and the deal, other types of due diligence may also be necessary, including legal, commercial, operational, environmental, or IT. Each plays a role in helping buyers gain a full understanding of the risks and opportunities involved.
When it comes to financial and tax due diligence, a detailed review can help to:
- Provide critical information on business performance, offering a clearer picture of financial trends and underlying risks (e.g. reliance on customers, revenue recognition concerns, key fee earners / relationship holders, etc.).
- Identify unrecorded liabilities that could otherwise catch a buyer off-guard to the extent that these obligations are not remedied pre-completion through recommendations covering indemnities, retention payments, price discussions or settling balances before completion.
- Highlight deal-impacting issues that might affect valuation or require legal protections in the transaction documents.
Without this level of scrutiny, buyers risk paying too much or encountering costly surprises post-transaction.
Why is corporate finance advisory just as important?
Corporate finance (CF) advisory is sometimes overlooked, but it plays a crucial role in ensuring a deal stays on track. CF advisors help in several ways:
Project management: Many deals fall through simply because they take too long. Delays can lead to shifting valuation expectations, distractions for key stakeholders, and even the emergence of alternative opportunities. CF advisors hold all parties accountable to deliverables, ensuring momentum is maintained.
Valuation: A rigorous and independent appraisal of the target’s value can help avoid overpayment, and also aid in justifying the acquisition cost to other deal stakeholders.
Negotiation: By combining insights from due diligence with broader market analysis, CF advisors help acquirers negotiate the right price and structure the deal effectively.
Risk mitigation: Expert advice can identify and mitigate against potential risk areas such as exposure through non-market deal terms in addition to deal-specific issues.
Interpreting the bigger picture: Financial and legal findings all need to be considered from a full deal perspective. CF advisors ensure that nothing is assessed in isolation, helping to capture deal-impacting items that might otherwise be missed.
How can UNW help?
Whether it’s your first deal or you’re refining your approach, getting the right advisors in early can make all the difference. At UNW, we take an integrated approach to acquisitions, bringing together corporate finance and due diligence expertise under one roof. We also work closely with clients’ wider advisory teams to help ensure all aspects of a deal are properly considered. This joined-up approach makes the process smoother, avoids duplication, and ensures every part of the deal is aligned. We’ve helped businesses of all sizes navigate acquisitions with confidence, offering clear, practical advice that makes a real difference.
If you would like more information about the topics discussed in this article, or any other due diligence related matters, please get in touch with dannymalone@unw.co.uk.