Your client is intending to enter into a major commercial agreement for collaboration. You as a Company Secretary have been asked to conduct due diligence for the prospective company. Which factors you will keep in mind

The goal of due diligence is to provide the party proposing the transaction with sufficient information to make a reasoned decision as to whether or not to complete the transaction as proposed. The following factors may be kept in mind in this regard: Be clear about your expectations in terms of revenues, profits and the probability of the collaboration to provide you the same. Consider whether you have resources to make the business succeed and whether you are willing to put in all the hard work, which is required for any new or collaborated venture. Consider whether the prospective business gives you the opportunity to put your skills and experience to good use. Learn as much as you can about the industry you are interested in from media reports, journals and people in the industry. Planning the schedule Once it is decided for a particular business, make sure of the following things: Steps to be followed in due diligence process Areas to be checked Aspects to be checked in each area Information and other material to be requested from the seller Negotiation for time Some times, it may be the case that, the other party in the collaboration wants the process to get over as soon as possible and try to hurry the proceedings. When the other party gives a short review period, negotiations can be made for adequate time to have a complete review on crucial financial and legal aspects. Risk Minimisation All the information like financials, tax returns, patents, copyrights and customer base should be double checked to ensure that the company does not face a lawsuit or criminal investigation. The financials are very important and one needs to be certain that the other company did not engage in creative accounting. The asset position and profitability of the company are vital. Since, due diligence exercise deals with the overall business, it is important to consider aspects such as: background of promoters of the collaborator performance of senior management team of the collaborator organizational strategy business plans risk management system technological advancement infrastructure adequacy optimum utilization of available resources. Information from external sources The company's customers and vendors can be quite informative. It may be found from them whether the other company falls in their most favoured clients list. Any flaws that the audit uncovers would help to negotiate down the sale price. Due diligence is "a chance to get a better deal". But one should not go overboard. It should be remembered that the whole point of buying a company is to add people to your own organization. Even if the seller and staff do not stay on after the deal, they may prove useful as advisers in the future. Limit the report with only material facts While preparing the report it is advisable to be precise and only the information that has a material impact on the target company is required to be included. Structure of information Once the due diligence process is over, while preparing the report, information has to be structured in an organized manner in order to have a better correlation on related matters.