Due Diligence

In recent times, India has witnessed a host of Mergers, Acquisitions and Consolidation activities.
Pressure from new players including MNCs, cost-competitiveness and customer retention – all these have led to either existing players joining hands to get market advantage or small players being acquired by those having good financial strength. In addition to this, rising corporate debt and higher default rates have led to emergence of Asset Reconstruction companies who buy the bad loans from banks at a discount and strive for turning around these assets to improve their value.

In both these cases, inspection by a seasoned professional is of utmost importance to assess the true potential of the asset, especially in case of manufacturing and infrastructure companies. Most people do not possess the technical expertise to inspect the fine details themselves. Additionally, every asset is different, so inspection is a bit of an art – you have to have a good eye and the wisdom to know what to look for. With all the variables involved, hiring an outside expert to help evaluate and protect the investment intuitively makes sense. Forbes notes that out of all major due diligence activities, technical due diligence and intellectual property review ranks as number two.

Leaders of acquiring companies like Private Equity (PE) firms, or other ARCs, are well versed in financial concepts, but may not be technical gurus. Most acquiring firms have a set of investment objectives in mind when acquiring a company. Performing technical due diligence to evaluate the product, architecture, processes, and organization helps ensure that those objectives are met prior to closing the investment. Additionally, a detailed look at these aspects helps validate any assumptions the investor has made.
Target companies are typically analyzed from three perspectives:

  1. Technical risks to the investment coupled with the cost to mitigate
  2. Opportunities for growth post-investment
  3. Strengths of the company that should be preserved and/or built-up on moving forward

While many observations identified in the technical due diligence process may not make or break a deal, it is important to understand the risks and opportunities to evaluate a potential investment. The existence of technical risks may affect the ultimate deal conditions or price. The cost of a technical due diligence is insignificant compared to the magnitude investment involved and the benefits are abound.

To support investors in decision making, BOE Consulting team, with its high level of Techno-Commercial acumen and robust processes, provides solutions for assessment of Asset Quality and its production capability, assessment of Reserves for its quantity & quality for Mines, Process Capability and Product Quality assessment, study of Operational Efficiency including likely cost of production, Capex and Opex requirement for turnaround, assessment of manpower quality and capability, compliance of various statutory clearances, etc.

What differentiates BOE Consulting from others in the space is our deep dive approach and robust due diligence process with a Strategic outlook in our recommendations. We take care of all possible opportunities and threats to a business like emergence and obsolescence of technologies, possible entry of new players in the market, likely changes in govt. policies, etc. – during our due diligence process and accordingly suggest measures for successful turnaround.

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