Business Due Diligence

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PwC’s due diligence experts analyse the financial risks and opportunities of any company that is a target for a merger or takeover. They investigate what revenue and cash flow can be achieved on a lasting basis, evaluate balance sheets and check the plausibility of the business plan.

A detailed analysis of the target companies is a prerequisite for assessing a takeover opportunity. Besides the financial aspects, knowledge of the operational processes and the value chain is absolutely necessary in order to properly analyse the target companies.

The comprehensive business due diligence conducted by PwC's experts also includes evaluation of the market conditions of the target business, operational and other factors relevant to a transaction decision.

PwC's analysis provides businesses with a basis for decision making, including a valuation model, probability calculations and sensitivity analyses. In the preliminary stages of an acquisition, PwC's experts also review the latitude available when interpreting accounts and valuations in accordance with the German Commercial Code (HGB), US GAAP or IFRS and present projected balances and income statements to see whether the forecasts are realistic.

They also develop simulated accounts to demonstrate the effects of the transaction on the balance sheet - from a breakdown of the potential purchase price into assets and liabilities to the residual value of the business.

In addition to the financial situation (financial due diligence), PwC's experts analyse and evaluate other transaction-related areas. Their services also include:

  • Tax due diligence
  • Operational due diligence
  • Market/commercial due diligence
  • Environmental due diligence
  • Treasury/pensions due diligence

Environmental risks that are discovered too late can lead to significant cost increases, especially in production industries

That's why PwC's experts carefully analyse and evaluate technical, legal and organisational weak points in the environmental management system. This allows businesses to solve specific problems, factor out problem areas and include the appropriate guarantees in the acquisition contract.

If direct contact with the management or access to production sites is not possible, analysis of databases and publicly available information - a so-called desktop review - can provide valuable findings on potential environmental risks. Our experts also identify the potential for optimising further business development following completion of the transaction (post-deal phase) and document this.

Not all liabilities can be recognised immediately in the analysis of individual positions, but they can have a significant impact on the future availability of cash flow. For example, open entries under currency or interest, gaps in liquidity planning, poor financial control mechanisms or under-funded pension commitments can pose enormous risks.

PwC's valuation experts make these risks transparent and calculable. They also arrange for one contact person to take on project management and coordinate the activity of the individual experts to ensure efficient communication.