Most importants DDs in minorty-shares investment

This topic contains 4 replies, has 5 voices, and was last updated by  Sultan Alrammah 4 days, 2 hours ago.

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    Wessam AlZamil

    For a minority-share acquisition (for example up to 20-30%) what would be the most important types of DDs to consider?


    Dear Wessam, in my opinion, in this case there are at least 4 main steps that must be taken:

    1- financial, to calculate the target valuation, historical results and future projections to validate the achievement of defined goals, margins, growth, etc.
    2- legal, to assess the contingencies existing in the company you intend to join as a partner to delimit the buyer’s responsibilities, in addition to drawing up a good shareholders’ agreement with clear rules on the rights and responsibilities of each partner (e.g. veto power, number of seats on the board, etc).
    3- Commercial, to assess the business model, the position of the target vis-à-vis the main competitors, whether the proposed projections are feasible and attainable according to the company’s history. If the target has the skills the buyer wants.
    4- Technical, depending on the industry and objective of the deal, it is important to know and evaluate, for example, the product that the target has (quality, right to win, differential, security, compliance, etc).


    Faisal Juhani

    I agree with you, these 4 types of DD are essential in any type of deal whether it is a minority or majority acquisition. In some rare cases, depends on the nature of business and the jurisdiction, you would need to add further DD steps such as Operational, Risk, Environmental…etc.


    Abdulaziz Noaim

    I believe regardless of the % the major DD’s needed such as technical, legal, commercial, and financial are recommended.


    Sultan Alrammah

    I think if we would rank all DD workstreams, the commercial DD would be the most important workstream because it is the only forward-looking workstream.

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