Financial and tax due diligence provides answers to the question: "Can or should we buy this company?"
In a figurative sense, “due diligence” could be described as the umbrella term for the comprehensive analysis of a company before it is purchased. The aim (especially before an acquisition) is to determine whether the information provided about a company in a purchase offer is correct or whether important information has been omitted. Nobody likes to buy the proverbial “pig in a poke”.
A balance sheet may look reasonable at first glance, but other parameters also play a role. For example, it is also about the market in which a company operates and the business model with which it works. A due diligence is an overall view that takes all factors into account, far beyond the balance sheet and business valuations. We specialize in financial and tax due diligence.
Financial due diligence – how is the company doing?
The financial due diligence examines, among other things, the annual financial statements, interim financial statements, BWAs, bookkeeping and planning calculations. How solid are the company’s finances? How good is the quality of the accounting system and the person who prepares it? This includes the tax consultant. What extraordinary effects have influenced past results? How plausible are planning calculations when compared with adjusted past figures? How plausible are management statements about fluctuations in income and expenses? What is the current development of the company? Do the last BWA and the orders already placed match the planned turnover and planned profit for the current year? The financial situation of the company and the credibility of statements about the future are scrutinized here.
Tax due diligence – what tax burdens are to be expected?
Among other things, tax due diligence determines the extent to which the company has fulfilled its tax obligations in the past and where there may be tax risks. Have correct tax returns been prepared? What has not yet been declared or has been declared incorrectly? What tax payments from the time before the takeover still need to be made? Have the VAT regulations been observed in the company’s own invoices or in business transactions with foreign business partners? Are there risks in the area of payroll tax, e.g. due to incorrectly taxed private use of company cars or bogus self-employment? Do the annual tax accounts include expenses that the shareholders should have borne privately? Do the contracts concluded comply with tax regulations and how quickly can they be terminated? Have the transfer prices been calculated and documented correctly? What additional payments are threatened during the next tax audit?
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