Since 2006, OGScapital has been producing top-quality business plans from offices in the USA, the UK, and Canada. For more information or to book a consultation, call 1-619-727-5304 (USA), 44-203-318-1069(UK) .
Change your life: start your own business
» » Financial-and-operational-due-diligence

Buy Side Operational, Commercial and Financial Due Diligence Services

Trust the experts at OGSCapital to do your necessary due diligence

With more than a decade of experience doing commercial due diligence, financial due diligence, and operational due diligence, OGSCapital will deliver the precise answers that help you make all-important business decisions confidently. Today’s savviest managers and business owners know how much is riding on these decisions. They are therefore eager to outsource their due diligence research and due diligence analysis to specialist firms that provide the in-depth due diligence audit they need.
When investing in or purchasing a company, time is of the essence. When, for example, the opportunity to buy a competitor presents itself, the purchaser must know (and know with a high degree of certainty) whether or not the acquisition is worth the cost. The same can be said of investing: though the opportunity may be short-lived, investors want some assurances that they will see a return on their capital before they commit to anything.

When you need answers and need them now, turn to OGSCapital

The desire to get in on the ground floor of an exciting business or to swallow a competitor can blind the investor or buyer to problems with the proposal. Smart investors and business owners know this and are therefore moving their due diligence online. This ensures that the due diligence audit is as objective as it can be.
If you are considering purchasing or investing in a company but available information is limited, you can trust OGSCapital to provide an accurate picture of the target organization. This picture will include:

Get an accurate and robust picture of either your own organization or one targeted for investment or purchase

For those who are selling a company or seeking investors to finance a new venture, there is an equally important need to provide these potential investors or purchasers with a robust picture of the organization. This can help identify ‘deal breakers’ early in the negotiations, saving all involved parties valuable time and effort. It also ensures that all parties can move forward confidently, fully aware of all of the opportunities and risks involved in the deal. Transparency from the outset is the only way to be absolutely certain that all parties know exactly what they’re committing to, and OGSCapital’s commercial due diligence services make sure that everybody involved is on the same page. This transparency prevents costly soured deals and litigation.

OGSCapital’s due diligence consulting services cover the following topics:

Major issues and key risks Major issues and key risks

Identifies and highlights the most important issues, helping provide all involved parties with an accurate and robust picture of the target organization, its key potentialities and its key risks. This includes extensive market research that seeks a complete understanding of the competitive landscape.

Asset and revenue quality Asset and revenue quality

Identifies key business drivers and the business trading model. Includes in-depth analysis asset quality and operational earnings. Crucially, this analysis seeks a complete and objective understanding of the company’s assets and revenue—an as-is picture more true to life than the often idealized self-portrait provided by organizations seeking purchasers or investors.

Other topics Other topics

OGSCapital will also provide assistance in preparing information for data room, support in SPA writing, valuation services, and a host of other due diligence analysis services. Contact us today to find out more about these services.

All members of the OGSCapital team have extensive due diligence experience from their work with globally recognized financial advisory and consulting companies including Deloitte, PWC, and others, all of which frequently engage in buyer/vendor side due diligences. OGSCapital has completed more than 250 projects as a due diligence analyst, and they have a long list of satisfied clients who got precisely the answers they were looking for.
With 25 years of experience with the world’s top due diligence consulting firms, OGSCapital can see to the bottom of even the most complicated deals.

Relationship to the Business Plan 

Deciding to merge with or acquire another business is a major decision in many ways. It requires a heavy investment of time and financial resources. Commercial due diligence is a comprehensive review of a targeted business in the context of the competitive environment and market trends or conditions. The impact of a merger or acquisition on your business goes far beyond just the financial impact. Joining two companies together in any form impacts the corporate culture, employees, operations, and management decision-making. Get it right, and your company is poised to succeed in the future. Get it wrong, and your company could suffer financially and operationally, risking its ability to remain a viable business.

For this reason, commercial due diligence does include a review of the business plan of the company you are interested in targeting. The business plan is reviewed within context of the state of the industry, the projected market conditions, and the competition. This particular document presents a company profile; establishes the operational foundation; describes management's experience; sets out the objectives and goals, and strategies to achieve them; and presents financial projections. As long as the business plan has been kept current, it offers a valuable picture of what the business targeted for an M&A is all about. (Note: M&A is an acronym for Merger and Acquisition. In this description, M&A is also used for Merger OR Acquisition.)

The challenge for a business interested in an M&A lies in knowing if the business owners were realistic when establishing sales goals, operational objectives, marketing plans, staffing requirements and financial projections. There are plenty of business plans in existence that are unrealistic. They were only developed in the hopes of finding investors, or they reflect unrealistic goals. If the business plan was not formed with the assistance of experienced consultants at a company like OGS Capital, it may not correctly assess market risks, the competition or costs. Many business plans are also outdated. The business owners or executive act as if the 'roadmap' is static, when in fact it should be regularly updated in order to stay viable.

You do not want to make your decision to merge with or acquire a business based on faulty information. A business plan that does not accurately reflect current operations, changing market conditions, industry disrupters and so on, can lead decision-making down the wrong path. An outdated plan is an early red flag that the targeted operation may not be all that it seems on the surface. The plan may suggest the business leaders have not considered external market trends, changing market segmentation, impact of new competitors, and current placement in the market. When interested in the commercial buying a business due diligence process, it becomes a critical project for taking a deep dive into what is really going on in the targeted business and where it is headed in the future.

This is also a process used by investors to ascertain whether an investment in a company is a good decision and by companies hoping to attract investors or other companies looking for a merger or acquisition opportunity. The investment due diligence and the acquisition due diligence are similar but have a different focus for the analyst.

Review Strategic Plans

Critical analysis of the business plan and financial projections is an important step when doing due diligence. The due diligence in finance is a key element of your project. Analysis of a strategic plan, if one exists, is just as critical. The strategic plan explains where the company wants to be in the future and how it will get there. It is growth plans based on identified priorities, focus of resources, and operational planning designed to meet priorities. When doing due diligence, OGS Capital commercial analysts compare the current and planned competitive positioning of the targeted company with an independent analysis of marketing, customers, sales and much more.

M&A consulting groups lead and manage financial and operational due diligence efforts, but they stop too soon. Though these efforts are required and crucial when doing due diligence, they are no longer enough in a high risk, volatile, dynamic competitive environment. Clients should ask, "Are they doing my due diligence in a way that will provide all critical information?" Risk evaluation can only be called complete when it considers the future and not just the present. When buying a business due diligence explores the potential of the M&A and helps decision-makers determine if the potential is realistic, rational, and has value.

Converting Diligence into Value

Due diligence research identifies key issues that affect your bid to merge with or acquire another company, finding the red flags and value issues that need to be taken into consideration. OGS Capital can approach your commercial evaluation process with full scope or limited procedures, depending on the needs of your organization. The due diligence proposal prepared by the analyst is designed to provide exactly what your firm requires for good decision making. A business may only need assistance with a financial or operational due diligence research, for example. On the other hand, a full commercial due diligence is often the client's request because of the importance of the project.

Commercial clients ask: What will we learn as they are doing my due diligence? This is a process that will help clients understand:

  • Key issues that can impact your commercial M&A decision
  • Underlying profitability that may not be readily evident
  • True value of your decisions concerning M&A
  • Impact of financial policies on the targeted company
  • Importance of the quality of information

The due diligence research process needs customization in order to produce full value for your commercial purposes. Using a standardized process that approaches the evaluation as a rote process is not going to produce the highest quality results. It is important to tailor the steps to fit your situation, issues, challenges, level of risks, deal potential, synergies, market, and short and long term goals of the buying organization. The OGS consultants with experience in due diligence in finance play a critical role in the process.

When delivering due diligence services we help clients organize and test their M&A strategy by doing a business review, competitive positioning and strategic strength assessment, customer base analysis, assessment of forecast achievability, and further value upside identification. The most complex issue of commercial value identification concerns the need to calculate the value of the new firm. Our consultants and analysts help your firm leaders understand the potential value after the organizations are combined in any form.

Mergers and acquisitions create new synergies after the commercial deal is done. The word 'synergy' usually evokes thoughts of a greater whole that produces greater and positive value. However, negative synergies can form also. Synergies are usually described in glowing terms. The post M&A will be more competitive, financially strong, more innovative and achieve greater dynamism. Yet, post M&A synergies are not necessarily only positive. For example, organizations have cultures and workforces that must mesh for positive synergies to flow to the bottom line. If they do not mesh well, the organization faces continual issues with turnover, operations and productivity. In another example, customers of either organization may not approve of the targeted company for any of a number of reasons, including environmental sustainability practices or the types of products it sells.

While doing due diligence, OGS Capital helps the buying firm's decision-makers identify potential positive and negative synergies. It also provides the information, data and metrics that will guide monitoring of the combined firm's synergies. One of the common errors organizations make when conducting their own due diligence services is making faulty and over optimistic assumptions. For example, the buying firm believes its marketing efforts can quickly assume the marketing of the products of the targeted firm. In reality, your marketing professionals need time to understand the new products or services, and to develop an effective combined campaign that fits the corporate culture and preserves its reputation. Until that happens, sales may not reach optimal level. Following are some more common faulty post-M&A assumptions arising out of low quality due diligence research results provided by low quality due diligence service providers or by the organization itself.

  • Over-estimating the economies of scale your business will achieve
  • Assumption that the best practices of the buying or selling firm will work as well as the best practices of the combined firm
  • Lack of in-depth data about the supply chain, customers, channel partners and/or managers, forcing your post M&A executives to spend excessive time and resources collecting and analyzing the data
  • Over estimating revenue synergies

OGS Capital's due diligence analysis is conducted by seasoned consultants who have experience with hundreds of M&As. Their experience enables them to guide the phases of the process in a way that brings to light potential challenges when conducting due diligence on a company. A client knows that when OGS Capital is "doing my due diligence" that the client's interests are always kept in focus. The due diligence analysis focuses on pre-M&A analysis, but OGS Capital experts always have post-M&A considerations in mind at the same time when doing a due diligence of company. In fact, organizations often decide to retain our experts post M&A to assist with monitoring against benchmarks, developing synergy targets, and monitoring key performance metrics.

Marketplace that Continually Changes

It is a fact that today's marketplace is dynamic which means it is in a continual state of change. Assessing a potential M&A has never been more complex than it is today. The marketplace is:

  • Hyper connected
  • Global
  • Technology based
  • Highly competitive
  • Offers easier market entry due to technology
  • Has heightened regulatory scrutiny
  • Controlled by customers rather than organizations due to social media communications
  • Continually changing due to consolidations, i.e. buying and selling of high-tech startups
  • Reflects changing dynamics at country level, i.e. emerging economies, cross-border transactions, changing governments

JP Morgan Chase and Co. conducted a review of 2016 M&A activity and published the findings in 2017 M&A Global Outlook-Finding opportunities in a dynamic market. Despite a challenging marketplace, the M&A market has proven to be resilient. In 2016, there were commercial deals closed that had a value of $3.9 trillion. This is despite significant pressures that would make anyone project significant declines in M&As. Yet, commercial deal making was in the trillions because M&As enable organizations to access new products, technologies, innovations, workforce skills and regions without needing to begin operations from the ground up. M&As enable easier cross-border negotiations. Another reason M&As remain an excellent growth strategy is that low cost funding remains available from a variety of investors. The investment due diligence provides the in-depth analysis needed to make sound investment decisions. 

The M&A enables your company to grow inorganically and creatively to take advantage of dynamic market opportunities that otherwise may have been bypassed. JP Morgan projects the M&A market will be supported by strong fundamentals and policy changes that are pro-business. The report also says there are opportunities for more aggressive investment strategies, and the investment due diligence can ferret out the opportunities.

Looking at the World's Bank's yearly Doing Business report, most countries are working to attract foreign investors by improving the ease of doing business. They are doing this by making it easier for those interested in buying a business to buy local firms and to access capital, and by strengthening the legal rights of investing firms. Merging with or acquiring a firm in another country is an excellent way to enter a global market, but it can only be safely done by understanding the risks, the economic and market dynamics, and the best paths to value creation. Commercial due diligence is a critical step in the evaluation process.

Conduct Due Diligence with Expert Consultants

OGS Capital has assembled a team of professionals who have extensive business consulting experience in a variety of ingdustries. Their past experience as top executives; consultants with prestigious consulting firms like PricewaterhouseCoopers and Bain; and as business owners enables our project teams to bring new perspectives and masterful analytical techniques to the client's due diligence analysis. When clients ask: "Am I getting expertise when analysts are doing my due diligence?" The answer is always, "Yes. Your business will always get full value from OGS Capital."

There is a long list of excellent reasons to let OGS Capital conduct due diligence services for your organization.

  • Objectivity
  • Access to team of due diligence specialists so there are no knowledge gaps
  • Customization of the process
  • In-depth review process
  • Analysis of business plan and strategic planning for M&A assessment
  • Time savings
  • Does not tie up business talent needed for operations
  • Assurances for potential investors that a thorough analysis has been conducted
  • Access to investor network
  • Avoid overpaying because the project is conducted the right way the first time
  • Clear definition and articulation of the business
  • Strategic market due diligences
  • Assessment of business plan and forecast assumption achievability
  • Proven buy-side and sell side CDD methodologies
  • Use of OGS capital subject matter specialists
  • Identification of operational capability of acquisitions, investments and disposals
  • Merger synergies assessment
  • Carve-out and separation issues
  • Operational performance review
  • Development of reasonable cost estimates pre and post M&A

Transparency throughout the process is critical, so the appropriate OGS Capital due diligence specialist works closely with your team when we do the due diligence. The buying company needs to consider a number of internal issues in conjunction with the due diligence process. Internally, can the post-M&A company achieve the targeted value that could be realized? Does the company have qualified managers who can succeed in the combined company? Is the in-house technology adequate or expandable? Can current and potential customer needs be met without interruption during the M&A process? Are new competitors likely to respond when the market discovers the M&A is a real possibility? Will solutions from the acquired or merged company be incorporated into the existing business model post M&A, or will a new business model be created?

These are the kind of complicated questions that buying companies must consider, and due diligences are the key to answering them. The strategic goals leading to consideration of the M&A contribute to the success of the due diligence process. Does the client's company want to strengthen a current market position or enter a new market? Does the company want to add technologies, expand a product line, or gain access to the targeted company's intellectual property rights? The goals will shape the effort when we do the due diligence to maximize results. The specialist knows the right questions to ask.

OGS Capital Solutions Offers Rapid Response

OGS Capital offers a credible and defensible process conducted by due diligence analysts. It is a process that involves a number of steps, but there are two main phases the client can expect when we do our due diligence. The due diligence service includes:

  • Phase 1 – Produce the Red Flag Report – Approximately one week (1) into field work the Red Flag Report is generated. The rapid response is aimed at focusing all the parties on key value issues. It is information that enables a rapid go/no-go decision and project scope reassessment as necessary. This saves the client a significant amount of time and money.
  • Phase 2 – Conduct due diligences and produce draft and final reports. If the decision based on Phase 1 is anything other than no-go, the due diligence team continues with its business assessment. The due diligence report is tailored to meet your commercial deal execution requirements. A draft due diligence report is delivered to the client who can then circulate it internally as desired to allow adequate time for comment, discussion and consideration of key value drivers, which aim to support your subsequent negotiation tactics.

When we do our due diligence, specialists analyze a host of factors and challenges associated with the merger with or acquisition of a company. They include revenues, profits, liabilities, vendor contracts, intellectual property rights, current or potential litigation risks, financial practices, taxes, regulatory issues, insurance matters, and much more. The due diligence service can be thought of as a due diligence audit. Following is a brief list of the specific types of activities that OGS Capital's due diligence analysts may review during your due diligence process. From financials to website, the review is thorough.

  • Financial – Analyze actual and projected financial statements for the last three years or longer; Investigate financial notes and audit findings; Identify revenue patterns; Review board approved budgets; Analyze working capital requirements; Determine future capital expenditures needed for continued growth; Research liens; Review tax calculations; and other due diligence in finance activities
  • Customers – Research the customer base – its makeup, top customers, revenues generated by type of customer, retention rates; Identify the sales pipelines; Review arrangements with sales persons, such as contracts and commissions; Identify issues and challenges concerning customers; etc.
  • Revenues – Identify revenue sources; Analyze risks to revenue flows; Identify potential for revenue growth by source; Analyze seasonality of revenues; and so on
  • Contracts – Identify and review all contracts – Loans, lines of credit, customer service contracts and warranties, software, partnerships and/or joint ventures, equipment, sales, employee agreements, and all others; Also do vendor due diligence
  • Intellectual and other property rights – Identify and analyze status of patents and patents pending, trademarks, confidentiality agreements, logos, service marks, and trade secrets; Identify and review legal actions like patent infringements, licensing disputes, insurance claims, encumbrances, etc.
  • Technology – Identify the hardware and software used, including licensing; Analyze risks and actual failures such as unauthorized intrusions or access problems; Identify whether systems are compatible with buyer's technology; Analyze IT operational and capital expenses; Identify potential for technology to become obsolete based on current or anticipated new technologies; Review the website; and so on
  • Competition – Identify the current competitors; Identify potential competitors; Analyze market conditions in terms of competitors; Identify current technologies that could influence ability to remain competitive, i.e. outdated customer service systems; etc.
  • Production or Manufacturing – (Depending on the company's business model, the due diligence analysis will review all aspects of production or manufacturing); Identify suppliers, subcontractors, customers, product warranties; Review age and condition of equipment; Identify product warranties and service agreements; Review plant operations, including ability to meet customer orders; Review product testing procedures; Analyze manufacturing quality standards and factors like rejections, returns, warranty claims, etc.
  • Management and Employees - Review organization chart; Assess employee agreements, compensation schedule, benefits, policies and procedures, incentives, and other employee documents and factors; Assess impact of potential layoffs and severance pay post M&A; Identify labor disputes; Assess workforce productivity and skill levels
  • Insurance – Review all insurance policies in terms of cost, adequacy, claims, etc.
  • Synergies – Identify strategic fit, including in terms of products, technology, employees, supply chain, partners, etc.; Analyze potential cost savings; Determine revenue enhancements; Assess how long it will take to achieve synergies
  • Corporate Status – Review articles of incorporation, board of directors, stock option agreements, tax certificates; Review union agreements; Review documents concerning rights to sell the company, stockholder meeting minutes, minutes of the board of directors; Analyze stock related documents concerning registration and rights; and so on

The preceding list for the due diligence audit is not a complete list of what is covered when we do our due diligence. Clearly though, it is crucial to have an expert in due diligence in finance involved. Other areas of a due diligence service may include environmental issues, government regulations and compliance, ethics, culture, and data room, to name a few. In summary, OGS Capital can offer:

  • Review of targeted synergies, implementation costs/risks, and potential upsides
  • Support of underperforming/distressed companies
  • Acquisition due-diligence
  • Stand-alone performance improvements of buy-outs
  • Vendor due-diligence
  • Due diligence online data rooms

The due diligence audit can provide information for negotiations support for commercial deal making or deal breakers, data integrity, synergies and costs, post-deal actions, financial controls, target working capital, SPA advice, and net debt.

Helping Clients Make Good Decisions

At OGS Capital, due diligence services are customized for clients based on their needs and intentions. The due diligence proposal minimizes the due diligence cost. Buying a business due diligence is a best practice, but it is a customized process that varies based on the situation. Often, the goal is to ensure the seller's company does not have potential liabilities that have not been revealed, that revenues are accurately reported, and that other financial matters are in order. However, when we do the due diligence, it covers a lot more than just reviewing financials, as has been discussed.

Setting up the due diligence online data room is a best practice. It can be a virtual or physical place where the seller makes copies of documents available to the buyer and investors for the due diligence audit. However, virtual data rooms are more common today. The due diligence online data room makes it possible for entities to negotiate across geographies, and it serves as a place where information is preserved. The documents concern legal, financial, and business matters. It is a fluid process in which some information is standard for every M&A, like articles of incorporation and employee compensation schedules, but other information is made available as necessary to negotiate the sale, like partnership agreements and environmental statements.

The advantages of a virtual due diligence online data room when we do the due diligence include:

  • Ability to make information available to anyone in any location as appropriate
  • Time and date stamping of all reports and other data
  • Information is available 24/7
  • Security systems can vigorously protect information
  • Users are tracked as to access
  • Ability to determine which reports have been accessed and by who
  • Time and cost efficient
  • No need to schedule access
  • Centralization of information
  • Easier communication for negotiation purposes

The data room enables OGS Capital to provide secure due diligence online. Parties involved in the negotiation who will have access to the documents will sign Non-Disclosure Agreements. It is highly recommended that a specialist work closely with the client to prepare the information for the data room and to analyze submitted information through the due diligence process. The negotiation process depends on the information in the data room being accurate and useful for:

  • Data room
  • Valuation services
  • Quality of earnings and recoverability
  • Identify price negotiations options
  • Identify working capital requirements
  • Cash generation analysis
  • Value side identification
  • Evaluation of robustness of forecasting
  • Sensitivity analysis
  • Identifying risks

The buyer wants to negotiate with the confidence the company can access information as needed to keep the process progressing. Many clients secure a software program for the data room, and OGS Capital can assist with finding reputable and reliable vendors as part of the due diligence service. Once the data room is established, the due diligence process can quickly move ahead.

Experienced Due Diligence Specialist Brings Value to the Process

OGS Capital specialists have conducted over 250 due diligences with efficiency, accuracy, and the highest level of quality customer service. Experience is critical to the success of such a complex project. It also enables us to keep the due diligence cost as low as possible. We advise a variety of organizations that include:

  • Multinational corporations
  • Leading global investment banks
  • Private equity houses
  • Owner managed businesses
  • Lenders
  • Shareholders
  • Governments

The scope of work in the proposal can be tailored to fit your key focus area:

  • Pre-M&A
  • Post-M&A
  • Coordinating teamwork
  • Enhancing communication

Coordinating teamwork and enhancing communication are on the list because it takes a strong analytical team to achieve desired outcomes for a commercial evaluation of your business or a target business. OGS Capital consultants coordinate with executives and senior leaders in the client's organization. The success of the commercial evaluation project also depends on effective communication between team members and closing all knowledge gaps. The OGS Capital project team drives the market and competitive analyzations, but the client's functional leaders need to be accessible and involved.

OGS Capital has a wide and deep network of experienced business people it can access during the commercial evaluation process. This access is part of the due diligence cost. It is not just the buyer and seller who provide information via request lists. It is also important to obtain opinions and analysis as needed from experienced peers industry specific professionals, government regulators, competitors, and others. Each due diligence specialist brings industry specific knowledge to the table, along with access to peers and professionals at industry and company levels. Client confidentiality and privacy is never compromised at any stage of the process. Information obtained outside the data room is always gathered by the specialist without revealing client names or any other information.

Objectivity and Thoroughness During the Commercial Evaluation

Objectivity is crucial to the project as any quality due diligence analyst will affirm. Sellers and buyers are usually anxious for the commercial deal to close. The buyer would not be expressing interest in an M&A unless executives had already completed some level of investigation as to the viability of the commercial deal. In many cases, the buying company has already been working with the seller in some commercial capacity, such as vendor or subcontractor.

Past or existing business arrangements can reduce the ability to maintain objectivity. A quality process involves the analyst asking tough questions and giving truthful responses. It also requires thoroughness every step of the way. Objectivity and thoroughness is achieved when we do our due diligence for a client by:

  • Vigorously adhering to established best practices
  • Rigorously manage the process from beginning to end
  • Inclusion of cross-functional leaders in the process
  • Effective communication between consultants and buyer, and buyer and seller
  • Continued in-depth investigation of seller information until satisfied there are no hidden risks or compliance issues, and the information is truthful
  • Seller responds appropriately to all information requests
  • Procedures are proportionate to the perceived and actual risks
  • Strong commitment to the process from senior leaders at both organizations
  • Buyer spending appropriate time reviewing information as it is made available
  • Maintaining a questioning perspective throughout the process, from beginning to end
  • Process is kept reasonable in that time is not spent gathering and evaluating unnecessary information

Consulting objectivity means the commercial evaluation project procedures and results would stand up to scrutiny by other independent professionals, if it were put to the test. OGS Capital has successfully completed hundreds of due diligence processes and has only received positive client reviews. Our professionals are experienced, knowledgeable, effective communicators and able to maintain objectivity. They bring a wealth of knowledge to the process and can access a broad network of associates should additional information be required during the process. The network of associates represents people with expertise in almost every industry who strengthen our ability to bring value to the process.

Avoiding the Pitfalls of Due Diligence Process

Organizations of every size involve outside professionals in the due diligence process. Even mega-corporations with credentialed business professionals will need one or more outside consultants to ensure a high quality process is completed and objectivity is maintained. There are many potential pitfalls concerning the process, so it is not a proposal that should be undertaken without professional assistance. That is the reason so many organizations decide outsourcing due diligence is a good decision.

Following are some of the potential risks associated with the commercial evaluation process:

  • Believing what the company submits for financials is not a good business approach
  • Accepting seller's answers at face value
  • Not being objective
  • Making faulty assumptions rather than verifying information
  • Leaving critical steps out of the process
  • Hiring consultants who unnecessarily lengthen the project time in order to charge more
  • Failing to do adequate market analysis
  • Overlooking information that is not well understood
  • Not knowing what to ask seller
  • Not knowing how to verify information
  • Not understanding how to extract critical information from the seller's leaders
  • Inability to identify falsified information
  • Inability to identify omitted information
  • Failure to take into account future impact of current volatility or events
  • Not considering how well the seller's management will continue to function post-M&A
  • Underestimating the risks
  • Not taking a deep investigative dive as risks would dictate
  • Losing time and money on an inadequate process
  • Not getting enough information to make an informed go/no go decision

 

Underestimating the risks of incomplete commercial evaluation project efforts is a top reason M&As eventually fail. For example, if IT systems are not adequately evaluated, the post-M&A company is faced with the need to raise additional capital to invest in IT improvements. It is important to gain a clear understanding of the post-M&A costs related to things like IT, product, etc. A quality proposal will include identifying all risks and vulnerabilities as much as possible.

 

Best Practices for Commercial Organizations

 

OGS Capital consultants utilize their expert knowledge combined with best practices to balance the project effort. Balance refers creating a process that goes smoothly from beginning to end and does not have gaps in the information investigated and analyzed. Balance also refers to avoiding excessive information seeking. It takes:

 

  • Persistence
  • Organization
  • Using industry experts from beginning to end of the project
  • Consultants and buyer's leaders working as a team
  • Naming primary contact points at buyer's organization
  • Setting a timetable that includes points of review to assess progress
  • Questioning all information provided by seller
  • Going where the investigation leads in terms of following up on information supplied or missing
  • Setting clear and specific goals and objectives
  • Giving consideration to the ability of two companies to work together post-M&A

The process helps the commercial buyer understand the target business, identify issues that could lead to a no-go decision, and identify contractual terms that should be negotiated. In and M&A, risks are discovered and allocated between the buyer and seller. The purchase price, payment terms, and escrow amounts are heavily influenced by the results of the process.

Avoiding Common Mistakes

Why do some commercial organizations attempt to do these types of projects themselves and end up getting poor results? After all, the buyer knows its business inside out and knows what type of business would be a good addition. However, knowing a company would be a good addition and getting hard facts that the seller is the right company to add are two different things. That is why many firms decide that outsourcing due diligence is the best decision.

OGS Capital knows through experience with commercial clients, who came to us after attempting the process themselves, that the project can quickly get off track. The project team must be able to plan and focus the process, and maintain that focus every step of the way. A well-orchestrated process is crucial to getting the information needed for success. Common mistakes buyers make include:

  • Not knowing the right questions to ask the seller
  • Trying to complete the process too quickly
  • Not spending enough time on critical financial matters that include taxes, operating inefficiencies driving costs up, and unusual items that need a deep review to find out what they really represent
  • Not having the right capabilities on the team, meaning the team is unable to properly vet all of the seller's documents
  • Not requiring full disclosure from seller's who are less than fully cooperative about supplying requested information
  • Not knowing how to effectively interview seller team members
  • Failing to identify some less obvious risk areas such as lack of customer loyalty or management weaknesses
  • Putting in-house business leaders on the team who then fail to meet their management responsibilities for day-to-day operations, harming the buyer's business

This is a short list of the common mistakes that can derail the commercial evaluation project at any point. The OGS Capital due diligence consultant has "seen it all" as the saying goes. Their extensive experience with companies of all sizes, from startups to established corporations, has enabled them to recognize and avoid common mistakes. They know how to respond to sellers who are reluctant to release information to the data room and how to follow the lead of information discovered during the process. Being able to productively follow the lead of information uncovered is a crucial benefit of due diligence consulting.

The commercial due diligence, financial due diligence and/or operations due diligence process is designed to be efficient and productive at every step. This principle saves the buyer time and money, and is the foundation of all OGS Capital proposals. All too often, buyer's attempting to do their own due diligence discover the people responsible for the project neglect their responsibilities for daily operations. People can only assume so much workload before something suffers. In this case, the 'something' is the buyer's business.

Other Reasons to Conduct Full Disclosure

In most cases, commercial investors request due diligence of a company before committing funds to a business. Before an investor is willing to invest hundreds of thousands or millions of dollars in a business, the investor needs to have a high degree of certainty the targeted company is financially sound and has no hidden risks or issues or critical issues. Investors review the following type of company information through due diligence of the company:

  • Business financial situation, including net worth, revenue potential, liquid assets, etc.
  • Type of business model or how the business makes money
  • Competition, including how the business ranks among competitors in terms of a variety of factors like pricing and market share
  • Financial condition based on a review of at least the past five years of financial statements and proforma statements for the next five years, looking at the debt load, liquidity, cash flow, etc.
  • Operational factors like policies and procedures and other internal processes
  • Quality of the management team
  • Market factors, like size of the market, segmentation, demographics, opportunities or potential, etc.
  • Customer demographics, satisfaction with business products, retention rates, etc.
  • Sales and marketing information, such as per customer acquisition costs, marketing costs per sale, etc.
  • Insurance issues, like risk mitigation, cost of insurance, type of insurance policies, etc.
  • Employee matters, like compensation, formal employee complaints, turnover, diversity, etc.
  • Cash flow schedule, such as seasonable differences
  • Technology and how it is used to grow the business
  • Pricing policies
  • Business plan and strategic plan

A business may also decide to go through the commercial evaluation process when it decides to seek investors it has not attracted yet. One of the many advantages of using OGS Capital due diligence consulting is that we have developed an extensive network of all types of investors – equity investors, venture capitalists, angel investors, and others. In fact, OGS Capital has secured more than $1.5 billion in funding for small to medium sized enterprises (SMEs).

If a company wants to sell its business, a sell side due diligence can be performed. The proposal is written to meet client needs.

Quality of the Due Diligence Consultant and Team Members

Quality counts when talking about management experience, products and services, and customer service. It is equally important to the commercial due diligences services. OGS Capital brings quality in a number of ways when performing due diligence on company commercial operations. Each proposal delivers:

  • Consultant expertise in a variety of areas, including financial and marketing
  • Careful selection of consultants who can bring the most value to the project
  • Consultants with impeccable credentials
  • Consultants with experience in over 42 industries
  • Technical review as needed to evaluate company's technology
  • Vigorous protection of client confidentiality
  • Project timeliness
  • Excellent communication skills
  • Ability to work well with client team
  • Efficient approach, maintaining focus at all times
  • Early identification of risks in Phase 1
  • Project customization
  • Competitive pricing

The more quality found in commercial due diligences services, the lower the risk of making a poor decision. There are many complex steps in the process, and quality of service provided by the due diligence consultant is crucial at each step. It is an important consideration always of any OGS Capital proposal.

Contact Us at Your Earliest Convenience

Successful commercial due diligences services conducted by experienced due diligence consultants can shorten the time between initial interest in an M&A and making a go/no go decision. Time is always of the essence in today's dynamic marketplace. Deciding to merge with or acquire another business, or to invest in a business, is always a major decision, especially after resources are allocated to the project. OGS Capital brings all required success factors to your due diligence consulting services, including objectivity, an expert team of business consultants, and broad experience with conducting commercial, financial, and operational, and investment due diligence. We also keep your due diligence cost as reasonable as possible.

We offer free consultation to discuss the client's needs for commercial due diligences and to determine the many ways our due diligence analysts can help. You can call us or fill in the quick online contact form provided on our website when ready to discuss a due diligence proposal. You will find out staff and due diligence consultants to be knowledgeable and ready to assist clients at any time. We are also found on Facebook.com/ogscapital and on LinkedIn as ogscapital. We look forward to helping you meet your business needs.

To start a conversation with our team, fill in the form.
A business plan consultant with relevant expertise will contact you shortly.

Your name:

Email address:

Phone number:

Message:

Client Speak
Client speak
Alex did a good job working with us on a business that is very unique. He was prompt in his responses and listened to our feedback to get a good final result.   Testimonials
Fox Models
OGS Capital
OGScapital – Serving you with offices in the USA, the United Kingdom, and Canada.
Phone : 1-619-727-5304 (USA), 44-203-318-1069 (UK)

We have been mentioned in the press: