November 27, 2022 at 4:05 pm #71542Joshua Tan Lien HoeParticipant
How should we budget / make provision for due diligence exercises?December 3, 2022 at 6:13 pm #71784asmnParticipant
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A rule of thumb could be 1% to 5% of the expected transaction value of the project.December 16, 2022 at 12:52 am #72370Kester LowParticipant
Better to spend on DD than to enter transactions that pose significant risks/have negative returns/complete mismatch in cultures. I would say to spend at least 6 months worth of salaries for full Due Diligence processes at least.January 4, 2023 at 12:32 pm #72996Dominic SullivanParticipant
I agree with the above comment from Rong. Approx 1-5% of the transaction value is a reasonable amount.January 7, 2023 at 9:25 pm #73195Sarah MillerParticipant
This is an excellent question. Our company is small and has acquired some other smaller companies in the last few years. We are now strongly and carefully combing through the financials which should have been done long ago, more thoroughly in the due diligence process. The budget aspect is something I am sure was never thought of. Thanks for posting.January 12, 2023 at 7:48 am #73415Kenneth John ManningParticipant
Hi Joshua, very interesting question, I think you would have to look at your own M&A strategy. The lower the spend on the DD theoretically could equate to missed opportunities to fully understand the target organisation. Your budgets and resource provisions could depend on questions such as, will the target company be a long term investment, will it be “flipped” soon after purchase, is there a requirement for external companies to carry out your DD or is it carried out in house? Is there a Vender DD being carried out, to what detail will the buyer DD be? The risks have to be evaluated and fully understood.April 4, 2023 at 11:22 am #77774Tarun KumarParticipant
I agree with the above comment from Rong. However, it can increase depending upon the complexity of Transaction and flow of information.April 4, 2023 at 11:23 am #77775Tarun KumarParticipant
The Due Diligence fees depending upon the complexity of Transaction and flow of information. Generally, it is around 2-6% of deal amount.May 18, 2023 at 4:25 am #79563Clarence YeoParticipant
It depends on how wide is the engaged scope of due diligence (financial, tax, legal, commercial) and it normally varies between 1% – 10% of the transaction value.June 1, 2023 at 4:25 pm #80912Pang Lai LiParticipant
Due diligence is not a linear process, there may be unexpected issues, delays, or requests that will affect the cost. It’s prudent to factor in flexibility in the budget and monitor and update the cost estimate as the deal progresses.
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