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Commercial Due Diligence and Private Equity Investments

Due diligence is an opportunity to ensure a private equity investment’s growth plans are robust. This is especially crucial in an environment with high multiples, where private equity investors have to show substantial growth in order to achieve their internal rate-of-return hurdle rates.

Private equity firms that are smart will double-check the information contained within the confidential Information Memorandum (CIM) by requesting specific commercial diligence. This will help them confirm what the CIM says with additional information that will help support their Day One growth strategy.

Legal due diligence is an essential component of this process, ensuring that the purchase won’t expose the new owner to unexpected liabilities. The legal team will review the company’s structure, ownership details and stock information to determine if there are any potential issues.

Physical assets, like equipment, facilities and stock, are https://webdataplace.com/top-legal-due-diligence-service-providers/ assessed in the process of commercial due diligence. This will ensure that the assets are in good order and uncover any opportunities to improve efficiency or improve the utilization of assets. In addition the team will take a look at human resources documentation to learn about a company’s leadership and its human capital such as org charts and roles. They will also check the treasury documents to confirm the amount of shares that have been purchased, and look for rights and debt equity agreements, or securities that may grant current owners rights that are preemptive. The team will also review a company’s legal contracts and agreements to identify any possible obstacles to future growth or M&A.

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