Commercial Due Diligence and Private Equity Investments

Due diligence is an opportunity to ensure the growth plans are solid. This is crucial in a highly multi-faceted market, where private equity investors need to achieve substantial growth in order to achieve their internal rate of return threshold rates.

The most successful private equity firms double-check the information contained in the confidential Information Memorandum (CIM) by asking for specific commercial diligence. This enables them to verify the information contained in the CIM along with additional information that will aid in implementing their Day One Growth Strategy.

Legal due diligence is a crucial element of this process to ensure that the purchase won’t create the new owner to unforeseen liabilities. Legal experts will scrutinize the structure of the company, ownership information and stock information in order to identify potential issues.

Other areas of commercial due diligence are looking at the physical assets such as equipment, facilities and inventory. This will help confirm that the assets are in good order and identify any opportunities to increase efficiency or increase the utilization of assets. Additionally, the team will look at human resources documentation to better understand the company’s leadership and its human capital which includes org charts and roles. They will also review documents for treasury to verify the number of shares that have been purchased, and look for rights such as debt equity agreements or securities that may grant current owners an unfettered right. In the end, the team will review a company’s legal contracts and agreements to identify any possible obstacles to future growth or M&A.

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