External due diligence advisors

This topic contains 17 replies, has 18 voices, and was last updated by  Chengzhi (Roy) Chen 6 days ago.

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    Christoffer Balieu

    From your experience, in what part(s) of the due diligence process is it particularly advisable for a buyer to engage an external DD advisor? Do you think the answer varies between countries or industries?


    Josh Liang Wee Ooi

    In my view some elements would be industry specific. For example, if it involves possible land contamination issues then an external DD advisor would definitely be necessary. In other respects, I think the typical parts of areas requiring external advisors would be legal and perhaps financial/tax. Even with an in-house team, my experience has been that external consultants are still employed – partly because the internal resources may be taxed for time and many not have all the expertise needed, but also unfortunately because many companies or investors need some aspect of the deal rubber stamped by a third party to reduce exposure to potential lawsuits. It of course varies also with the type and size of organization involved.


    Anne Becker

    I think it will also depend on the size of the acquisition. We’ve used just in house personnel and we’ve used outside law firms and finance/tax advisors.


    Ang Pek How

    I think that the answer varies across countries and industries as it depends on the level of expertise and experience of the in-house team. I think it would be crucial to engage an external due diligence adviser to perform financial and commercial due diligence in default as an independent opinion on the financial standpoint and valuation of the target company are crucial in the acquisition exercise. Other areas could be perform by the in-house team if the team possessed sufficient expertise and experience. The size of the acquisition could be another factor as large acquisition requires additional time, effort and resources. Engaging an experienced external adviser to assist the acquirer in the acquisition process would be meaningful as it would not be efficient for the acquirer to deploy its internal resources given that a large acquisition process are time consuming in nature.


    Fathurrahman Latama

    In my opinion, it depends on the size of the acquisition, the expert available on the buyer side, whether the buyer knows the way around the industry, different countries operated of the buyer and the seller, etc.


    Amy Stutzman Fortna

    I think this depends on the experience and availability of the in-house team. If you are entering a new, highly complex industry for which there is little in-house expertise, engaging an industry expert would make sense.



    I think it depends on the size of the acquisition and the relationship between the two parties.



    In my opinion, the size of the industry and relative size of the target contributes to the main consideration of hiring an external advisor. For countries, it might apply if it pertains to a complex cross border deal.


    Edwin Ng, CFA, CA

    Really good inputs from all.


    Hannah Barber

    I personally think it depends on the size of the acquisition and the current team you have in place to perform due diligence. Do you already have financial analysts on staff? In-house legal, etc. In terms of a large acquisition, the financial and commercial due diligence piece are extremely important to engage with a third-party, if you do not have an M&A team in place. Again, all depends on the size.


    Markus Gustafsson

    In the Tax DD in my opinion. Especially when doing M&A in companies with operations in different countries with different tax laws.



    Agreed that it really depends on the experience and expertise of the in house team. Eventually. I think the board or CEO will have decide how much reliability they can put on their in house team and they have to justify the risks and benefits arising the engagement of either internal or external team of expert. If resources allow, I would think the top management will engage external expert on most of areas and use the internal team as independent check on their works.



    Definitely engaging advisors are key to most transactions, yet countries and organizations vary. In some organizations they have the legal, financial and technical organization and their dependence on external advisors are limited. In my opinion, engaging external advisors are very important as they will look into the transaction form their specialty point of view with an advisory role in mind.



    How can an external due diligence advisor advice on an industry without spending massive of time to understand the industry? As such, great care in terms of selecting the external due diligence advisor to ensure alignment with the task at hand. Otherwise, you’ll probably be better off seeking the input of an existing practitioner who would be able to see the business as it is (after years of accumulation, reflection and thoughts)



    Yeah I also think it depends on the size of the acquisition (financial risk), and the competency of the in-house DD evaluators (e.g. same industry, same country as target company, familiarity of the target company’s business model and strategy). If the deal is significant and/or in-house evaluators are not confident of the target company/industry then best to get external advice.

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