Due Diligence

A dynamic set of activities involving working with many unknowns identified via an iterative process

What is due diligence?

Due diligence is an investigative process that identifies, verifies and confirms the claims of another party. It is also an effective process used to uncover risks and highlight important issues, providing valuable insight to companies before they sign a new contract, form a partnership or make an investment.

Why is due diligence vital to your business?

Due diligence helps companies to identify risk areas and key issues, but it can also reveal opportunities that help you in negotiation. Without due diligence, your company may encounter activities that could disrupt your operation and hurt your reputation later.

Why perform due diligence?

  • Quantify the real risk of a financial transaction, particular if the transaction takes place in a jurisdiction unfamiliar to you
  • Assist in accurate decision-making
  • Identify red flag issues
  • Provide leverage for business valuation and negotiation
  • Verify that investment or acquisition criteria have been met
  • Ensure the other party or company is trustworthy
  • Meet legal compliance and/or get regulatory approvals

Types of due diligence provided by TAQEEM Intelligence

Financial due diligence

Financial due diligence is a comprehensive and investigative process aiming to assess a company’s financial strengths by examining its financial data, which may include historical sales, expenses and working capital, as well as key assumptions used in management’s forecast. The aim of financial due diligence is to help investors see if the deal is worthwhile and have a better understanding of the potential risks and opportunities before signing on the dotted line.

Financial due diligence is typically carried out before mergers and acquisitions. Other circumstances that warrant financial due diligence may include when a company looks to get additional funding or when it is in dispute with another organisation.

Legal due diligence

Legal due diligence reviews legal risks that exist in a company, stemming from its organisation structure to contracts that it has with its suppliers, clients, partners and also employees. In addition, how the upcoming deal is structured may also have legal implications.

Common areas that our legal due diligence team reviews include:

  • Ownership of a company (share certificates issued to board members, directors or key stakeholders)
  • Management structures
  • Company procedures
  • Legal obligations such as loans
  • Ongoing litigation, if any

Human resource due diligence

Human resource due diligence assesses the risks and opportunities pertaining to the employment structure of a company. It usually includes HR operations, employment contracts, grade and salary bands, leave policies, benefits, as well as any on-going disciplinary cases. The aim is to understand the company culture of a target company and see how it can facilitate a smooth transition.

International due diligence

This form of due diligence is vital to companies that already have operations in numerous countries and legal jurisdictions or are planning to go international. International due diligence is the process of acquiring and analysing local information not publicly available outside of the location. At TAQEEM Intelligence, we have helped companies to obtain:

  • Verification of a foreign business partner or client
  • Political situations in another country
  • Local economic landscape
  • Potential risks pertaining to local illegal activity and/or corruption
  • Other local issues

Over many years, we’ve developed a network of trusted intelligence experts in Europe, the Middle East and the Far East, including in countries which the UK government and the European Union would classify as ‘high risk’. The list of high-risk countries changes from time to time, but essentially they are countries said to be vulnerable to corruption, support money-laundering schemes, or even have regimes that are linked to terrorism financing. If your organisation has rushed to invest in one of these countries, you or your company may become a victim of the country’s distinctive political systems or policies. This is why companies turn to our international due diligence team first. We are here to help you verify a foreign company’s legitimacy and undisclosed facts, along with the business environment in that particular country.

Due diligence methodology

Generally, most companies conduct due diligence before making a financial commitment – which we call it pre-emptive due diligence. Increasingly though, companies realise that post-transactional due diligence is instrumental in helping them reduce the damage caused by an unexpected event or help them recover from the situation. Here’s a snapshot of pre-emptive due diligence and post-transactional due-diligence.

Pre-emptive due diligence

Prevention is better than cure and initiating due diligence before an important transaction can save your company time, money and many problems. In essence, pre-emptive due diligence is a risk-reduction process. It starts by us gathering intelligence from various sources rigorously – the more complex the pending business transaction is, the greater the level of effort we would invest in collecting the information to characterise the risks.

Post-transactional due diligence

Sometimes even thoroughly planned business transactions can result in issues that put your company at risk and make you ask, “What had happened?”, “How could I prove it?” and “How do we minimise the damage?” – to answer these questions, a review on legal, financial, technical, operational, or even environmental can help company directors to unearth information that can be used to contain the damage, salvage the reputation, and recover from the situation.

Know your customer (KYC)

Part of due diligence, Know Your Customer (KYC) is a system that requires a company to implement identification procedures to verify its customers, based on the level of money laundering or terrorism financing risk that a customer poses.

The concept is that if your customers are truly who they say they are, then you will have greater confidence in dealing with them. At the same time, your company has also reduced the risk of it being exploited for illegal activities, such as money laundering.

Over 90 countries around the world have implemented KYC requirements, although the level of compliance required may vary. With technology now blurring country and city borders, company today must have a responsive KYC framework that adheres to the guidelines of your home country (or where your company is based), as well as at a global level.

It is advised that your company must apply customer due diligence measures:

  • Verification of a foreign business partner or client
  • Political situations in another country
  • Local economic landscape
  • Potential risks pertaining to local illegal activity and/or corruption
  • Other local issues

Call TAQEEM today to discuss how our due diligence service can help your business. Alternatively, you can send us an enquiry via our Contact Form and we will get back to you as soon as possible.

With TAQEEM by your side, you’ll have the expertise, reassurance and support to move forward with confidence. Your company is our top priority.

Other types of due diligence

While seasoned investors value financial, legal and human resource due diligence, many successful entrepreneurs are also considering environment due diligence as they want to make a positive contribution to the society at large. Environmental due diligence may include a review of energy usage, waste disposal, packaging process, among other touchpoints that can improve one’s corporate social and environmental responsibility.

Another type of due diligence that is gaining momentum is intellectual property due diligence, given that disruptive technologies continue to shape our future. The process involved is to review and verify the intellectual property ownership, usage, and licensing agreements.