Decoding due diligence to startups

Decoding due diligence to startups

Due diligence is a word familiar to Businessmen and Industrialists. It is the systematic approach of research and analysis that is done before investment, M&A (Merger and acquisitions), loans, Partnerships in order to determine the potential issues of the subject we are intended to do. It’s a precautionary measure to determine whether we are making a good deal or costly mistake. Various companies provide service on due diligence which helps for new founders or startup owners to do the business analysis that has become an integral part of the expansion. We could see more startups come under the scanner of Enforcement Directorate or Income Tax department just because they have committed few mistakes with respect to tax compliances. Since the companies are unaware of the procedure, they might make the blunder which could land them in trouble. Due diligence is not confined to business analysis, It’s a broad study which covers Finance, Tax, and Legal, etc. Companies should look at the due diligence as one of the most important prospects which could help to expansion or acquisition without any haste.

  • Can Due diligence can be done by the finance department of my industry?

No. It can’t be done. The finance department can do day by day accounting of the factory. In case of due diligence, it’s more related to government norms and procedures. I knew few factories which can do due diligence on their own related to complete the due diligence involving all the requirements, It’s better to go with experts who can have wide knowledge about Due diligences and Statutory compliances systems. But they cannot do business analysis and legal due diligence. Business analysis can be done with technical knowledge as well as business and marketing minds. I don’t find any finance team who can do analysis on technical things.

  • Can you lists the service providers that can do Due diligences?

KPMG, Versutus, RSM global, Whatis.

  • Can you pick the best among these service providers?

I could pick “VERSUTUS’’. Versutus approach is completely different from others. They do a traditional analysis of business right from scratch. They understand the rationale of your investment and do the research accordingly. If you have a specific concern, they will focus much on those aspects. They focus on identifying risks, opportunities, which affect value and impact your negotiating position and highlighting areas of specific care needed. Their analysis usually includes historical, sustainable, forecast financial performance and balance sheet. Financial due diligence is often accompanied by Tax, HR, IT and Environmental. Their approach will be helpful to understand your business. They simply pick the heart of the business and do analysis on this. I suggest VERSUTUS do analysis in a different manner rather than going as per basic norms. VERSUTUS thinks out of the box and reports the things which is out of our reach.

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