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Private equity deals aren’t complete without a thorough due diligence procedure. It is essential to identifying areas of value-generating operational changes prior to investing in a business.
This process usually begins with an information memorandum that is confidential (CIM) A document that includes financial data, a description of the management team and commercial specifics, such as insights into the target company’s customer base and products. Then a savvy private equity company will enhance the CIM with questions more specific to the business and use an electronic data room to collect documents and provide answers to the target company’s management team.
Legal due diligence is a vital procedure, particularly when it comes to buyouts. Typically, the business plan for a purchase involves cutting down on staff, selling off assets or closing facilities or offices – and all of these activities are prone to generating legal issues.
As private equity investors strive to attain their internal rate of return (IRR) hurdle rates in the present era of high purchase multiples, solid commercial and market due diligence is more vital than ever. A thorough approach to due diligence will help private equity firms establish a productive day-one growth strategy, and help them unlock more value than they imagined possible.
To learn more about Baker Tilly’s ability to assist you in your due diligence, get in touch with our team. We’re here to assist you succeed in your next deal. The image featured in the article is credited to Getty Images.
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