No successful transaction without due diligence

This principle certainly applies, because it is the only way to calculate risks and avoid unpleasant surprises once the deal is completed.

Due diligence, literally translated as "due diligence," is the examination of a target that complies with the due diligence standards of the respective jurisdiction. Through a structured due diligence process, the seller creates trust on the buyer's side and thus a higher purchase price potential. Furthermore, the seller establishes the conditions for their release from liability, reduces guarantees in purchase agreements, and can better plan for the additional workload for their own employees. It is therefore advisable for sellers to proactively manage their due diligence.

At the beginning of every transaction, the general guidelines should first be formulated. Sellers should ask themselves what overarching goals they want to achieve with the transaction and what concessions they would be willing to make. Buyers should consider what potential they see in acquiring the target and how important the transaction is for the future strategic direction. This is followed by answering organizational questions such as which internal competencies are available, which competencies need to be acquired externally, who will manage internal and external communications, and what the decision-making processes should look like.

The scope of a due diligence naturally varies depending on the transaction, company size, and buyer type. Especially for large transactions, the disciplines range from tax and legal to finance, pensions, and human resources. However, even for smaller companies, industry-specific specifics such as environmental due diligence, for example, for a foundry, are necessary.

Our Due Diligence Checklist provides you with an overview of the key issues and also uncovers any special features caused by the COVID-19 pandemic. Due to the high complexity of an M&A transaction, buyers should always engage competent advisors with complementary specializations in the relevant due diligence areas in addition to the internal interface managers.