Due diligence

Due diligence is a necessary and natural step for a foreign company wanting to invest in Poland.

Due diligence means a process of multi-dimensional, in-depth audit of inter alia the financial, tax or legal situation of a given enterprise, carried out usually in connection with the planned capital transaction such as merger, acquisition, spin-off or sale of the organized part of the enterprise.

The purpose of due diligence is primarily to provide the potential investor with independent and reliable information about the audited enterprise, to indicate the relevant risks and threats related to the current and future operations of the company, where all the information gathered will allow the investor to make the right decision regarding the transaction. Due diligence results are also an essential element of negotiation in the process of valuation of the enterprise being the subject matter of the transaction.

Thanks to its many years of experience in conducting due diligence in Poland and with the cooperation of a group of experts, being certified auditors, auditors and tax advisors, Moore Stephens Central Audit provides comprehensive support from the point of view of both buyers and sellers. Ordering due diligence, buyers most often aim to verify the merits of the proposed transaction, and sellers – to make sure that the activity they plan to sell has no irregularities or risks that could potentially reduce the price of the shares.

Moore Stephens Central Audit primarily conducts due diligence for manufacturing, service and real property companies e.g. in the construction, power, automotive, food and industrial sectors. We have also for many years cooperated with good effect with private equity funds and financial institutions buying and selling shares in portfolio companies.

Sample scope of Due Diligence:

1. General review of company operations 
2. Financial due diligence
3. Tax due diligence 
4. Vendor due diligence 

The scope of Moore Stephens Central Audit offer for due diligence in Poland for a given entity is always adapted depending on the future investor’s expectations and specificity of operations of a target company. If required by the specificity of operations of a given company, we also make use of support by third party experts and partners cooperating with Moore Stephens Central Audit (e.g. within the scope of actuarial services used in calculating pension provisions, etc.).   

Terms of cooperation and due diligence results

The first step directly after determining the scope of audit is to secure the confidential data of the enterprise and parties to the transaction by way of concluding a relevant agreement (non-disclosure agreement).

The course of audit and deadline for providing the conclusions depends greatly on how fast the audited (target) company is able to provide data and documents necessary for conducting the due diligence process presenting the audit results is issued within two or three weeks from the date of receiving a complete set of documents. Due diligence may also be conducted on the basis of electronic access to documents of the enterprise (virtual data room/VDR).

Depending on the scope of audit, due diligence deliverables may include the following documents:
 
  • a list of risks with our risk level assessment and probability of its occurrence;
  • a list of adjustments broken down into adjustments related to the current and previous years, with a description of the identified problems;
  • a list of identified non-standard/one-off operations that affect the result value at the level of EBITDA.
Typically, the presentation of final results is not the final stage of cooperation. We often support our clients both during negotiations of transaction terms and conditions, and in the course of the so-called post-acquisition, where due to a variety of reasons, such as payment spread over time, our engagement is necessary in order to assess if the target company has reached certain KPIs determined during the negotiation phase.

If you need any support with due diligence in Poland, contact us.