Transaction advisory services: More than just (financial) due diligence

Transaction advisory services: More than just (financial) due diligence

The M&A market is booming. Recently, acquisitions, divestitures, mergers, and acquisitions (collectively “transactions”) have soared to a great height. This trend is likely to continue in 2023 and beyond, experts predict. There is a lot to do for transaction advisors.

What are the tasks involved in transaction advice? What is the role of Transaction advisory auditors? Let’s know.

Accompanying the purchase or sale of companies or individual parts of a company is complex and multifaceted. For auditors, transaction advice is often about carrying out the so-called financial due diligence, i.e., an examination to minimize the risks of the transaction.

But the work of transaction advisory services begins much earlier, namely with the idea of ​​a transaction.

These advisors accompany the transaction process holistically, i.e., from the idea to the conclusion of the transaction – together with a team of auditors, lawyers, and tax consultants.

The transaction strategy, which defines the objectives of the intended transaction, is derived from the transaction idea. In the next step, the advisors either research suitable target companies for the buyer (“buy side”) or qualified investors for the seller (“sell side”).

Sometimes, they also help in preparing the marketing documents to market the transaction in a structured way among the agreed target groups with the required sensitivity.

During an M&A transaction, carrying out a due diligence check to examine the opportunities and risks of the planned transaction is important to give prospective buyers a sufficient basis for decision-making.

A due diligence review typically has the following components:

  • “Commercial due diligence”, in which the sustainability of the target company’s business model is examined,
  • “Financial due diligence” to examine the financial situation and development,
  • “Legal due diligence” and the “Tax due diligence”, in which the legal and tax risks are assessed, supplemented by sustainability criteria (environment, social & governance).

Depending on the subject matter of the transaction, technical due diligence may also be required. It is usually carried out by the buyer himself or by an expert consulted and deals with the technical aspects of the transaction object.

If the result of the due diligence check is satisfactory for the prospective buyer, transaction advisors then advise on the drafting and negotiation of purchase contracts and other documents accompanying the transaction.

Besides, they accompany the clients in the conclusion (“signing”) and execution (“closing”) of these contracts. Then the post-merger integration begins, in which clients get support in matters related to the integration into existing company processes and workflows.

What expertise is essential for transaction advice?

Different main topics arise essentially in the context of M&A advisory, commercial, financial, legal, and tax due diligence and legal advice on the design of the transaction documentation to the valuation.

Due to the high level of complexity in transaction processes and the different focal points of company takeovers or the acquisition of assets, it is imperative to choose transaction advisors with extensive transaction experience, like those working at CAC, who have already successfully advised on various projects at the national and international level.

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