Commercial due diligence
Any business seeking to make an acquisition needs to understand not only the specific performance of the intended target, but how this relates to projected market conditions and its competition within a specific industry.
- Making an acquisition means considering not only the merits of an individual business, but also the context in which the business operates. Without understanding the unique qualities of the sector a business is in, it is impossible to arrive at a realistic valuation.
- A whole range of factors can influence the competitive state of a market. These include technology, customers, legislation, powerful buyers and the emergence of new geographic markets. Each of these needs to be considered for the impact that they might exert on the future value of an acquisition.
- A potential acquisition may be projecting very high earnings. These need to be validated against data from the market to test their reliability. Equally, earnings projections may be based on the development of new products or markets. These assumptions also need to be assessed against the broader general market.
- PwC’s commercial due diligence services are supported by our dedicated industry expertise and our broad geographical reach. Our understanding of specific markets allows us to assess assumptions and projections and provide efficient, cost-effective services in a timely manner.
Benefits of PwC commercial due diligence
- We have carried out more than 600 commercial due diligence and 150 consulting assignments worldwide. The extent of our global reach means that we can help our clients spot opportunities and advise them on all the relevant factors to help them establish themselves in the appropriate markets.
- We can help assemble the teams and share our in-depth industry and market know-how to identify and address the key issues quickly and cost-efficiently.
- PwC's conclusions are based on well-researched and integrated views on all aspects of the transaction. This translates into a less cumbersome and more efficient due diligence process, meaning your organisation may only have one report rather than two or three. This then saves you time and of course, cost.
- In New Zealand we draw upon Australian and Singapore Commercial Due Diligence based teams to compliment our knowledge of our market.
General HR due diligence
Much of the value realisation in a merger or acquisition depends on the attitudes and behaviour of people involved in the target business. It is therefore important to gather people related information to help evaluate current issues that might diminish the value or impede anticipated value realisation post-deal. In addition to HR relevant information collected in other areas of the due diligence process, this work covers:
- HR management
- Culture and values
- Compensation and benefit systems
- HR environment
Benefits of PwC HR due diligence
Depending on access to relevant senior management and key HR information (such as culture or climate surveys) PwC can provide solutions to the important questions such as:
- Retention issues – what is the likelihood that key senior management are at risk of leaving the organisation? Does the organisation have retention issues in relation to staff critical to business operation? What is the typical cost of hiring? Benchmark turnover statistics.
- HR management – do HR policies and procedures generally meet standard legal compliance and provide a sound framework for managing staff?
- Culture and values – How adaptable and resilient is this organisation? Are its staff likely to ‘hit the ground running’ post-deal? Is the culture likely to have a positive or detrimental impact on expected value/benefit realisation of the acquisition? If merging two organisational cultures, how different are they and what are the likely implications?
- Industrial relations environment – What is the current level of unionisation and to what extent is this likely to pose any risks post-deal?
IT due diligence
The heavy reliance on information technology (IT) for business operations, management information and financial reporting in today’s business environment makes IT a priority item in M&A. Not only does IT often count among the largest capital and operational expenditure items, the owners of a business must also find better ways of deriving value and leverage from IT assets.
- Purchasers need confidence that the IT assets supporting the business are up to the task.
- Purchasers need to have a clear view of any IT investment required to maintain the EBIT of the business being purchased and factor these costs into their calculations and negotiations.
- Vendors need to secure the best possible sale price. Identifying and then mitigating or addressing IT issues with transaction relevance reduces purchaser risk which supports a greater sale price.
- Vendors and purchasers both need to minimise the impact of the sale and transition process on business operations.
Benefits of PwC IT due diligence
- Provides buyers with insightful understanding of the cost and impact of system related issues that are relevant to the transaction being considered.
- Identifies opportunities to improve business performance through enhanced IT enablement and cost reduction.
- Provides purchasers with options and strategies for managing the IT related aspects of a transaction to avoid disruption to business operations and reduce risk.
- Identifies IT systems options (and the capital required) for achieving post deal strategies that are being considered during a transaction.
- Provides purchasers with greater certainty that the IT systems supporting the target business are fit for purpose and identifying resources critical to continued business-as-usual operations.
Cyber security due diligence
In today’s business environment, IT systems, IP, and data are often some of a business’ most valuable assets, and are also among the hardest to protect. During an M&A process it is important to determine whether these assets are, and have been, appropriately protected so that all parties can make informed decisions about the true value of the data assets and understand the level of risk and exposure in the business being acquired. Our cyber due diligence team draws on the expertise of our cyber security specialists to provide a robust assessment and tailor the level of detail to the circumstances of the transaction, from a high level ‘desk top’ review, to a full scope cyber security assessment.
Benefits of PwC cyber security due diligence
- Our team’s expertise means we are able to provide vendors and purchasers a clear understanding of the cyber security threats and risks that the business is experiencing and how the business has managed and responded to these risks and what that means for the value of the business.
- Provides purchasers with an understanding of the business’ cyber security framework. This gives the parties to the transaction confidence if the framework is found to be robust, and can also identify potential risk areas to the business.
- Provides insight into any historic system breaches so that the purchaser can protect against reputational damage and also factor this into negotiations.
- Provides an independent assessment of the on-going risk and alternative approaches and costs for managing that risk.
Deal integration and separation
Delivering on the value of a deal starts well before the deal is signed. It involves clear planning for the activities needed after the deal closes and high quality execution.
- Global research shows that many deals fail to deliver their forecasted value. For buyers, part of the reason lies in the lack of successful integration of the newly-acquired business. For sellers, its often the lack of a
- Delivering value requires considerable resources, some of which are needed before the deal is signed.
- A clear strategy, a well prepared integration plan, a well-resourced & skilled integration team, along with a clear focus on people & culture change are all necessary pre-requisites to successful value creation.
- PwC has extensive experience of helping businesses integrate their acquisitions, or and separating the divested part of a business. Our teams comprise individuals with ‘in-line’ industry experience.
- We have developed specific tools and techniques that have proven their worth across multiple transactions.
The application of these increases the likelihood of your deal delivering real value.
Benefits of PwC post deal integration
- Our dedicated teams work on-site to help manage the significant changes that a deal generates.
- We address the immediate issues for the acquirer, covering the initial period before the deal closes (including integration-related input to the Sale & Purchase Agreement), the initial 100 days after the deal closes, and delivery of the first year targets.
- These targets will include synergy plans, cultural integration, technology implications, and the cost and revenue enhancement plans needed to deliver value from the deal.
- Our programme management experts help ensure that you develop your plans, maintain progress, and appropriately govern for value.
- Our broad knowledge of people issues allows us to give practical advice on employee management, addressing culture, organisational development and the necessary style alignment activities across both the acquirer and acquired businesses.
Simply put – deal value, delivered.
Synergy review & assessments
Bolt-on acquisitions generating revenue and cost synergies are becoming an increasing focus of both corporate and private equity M&A activity, providing a potential buyer with a comprehensive advantage over other buyers.
Benefits of PwC synergy review & assessments
Given the importance of synergies in supporting the valuation of a business, we conduct a detailed review of the synergy proposals underpinning the deal. The focus is on achievability, cost to implementation and timing of delivery.
Our team assesses all aspects of synergy delivery including key risks, interdependencies and the probability of their successful achievement.
Working with management we will scope out an implementation plan, which will include a forecast of the actions, costs and profit impact in the months post completion.
The detail and accuracy of the synergy forecast is increased towards completion as data is received. On completion it provides the backbone of the integration plan.