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Due Diligence

 


 

Due Diligence, Mr. Files is Mr. Due Diligence.

Mr. Files is the author of “Due Diligence For The Financial Professional, 2nd ed”  a multiple award winning book, is President of the International Due Diligence Organization and is a Due Diligence Professional, DDP.

International Due Diligence

Due Diligence should be viewed not only as a means to mitigate risks associated with new and existing clients, but also as an opportunity to better Know Your Customers, in order to more effectively meet their needs. Financial Due Diligence involves many aspects and it requires a host of procedures including identity verification, identification of known associates, business partners and other significant relationships, verification of sources of funds, and answering subpoenas with minimum disruptions to the organization.

Now more than ever, business relationships require the exercise of due diligence in an environment where you often understand neither the language, nor the culture, nor the laws and regulations, nor the financial practices within a given locale. And Internet searches often cannot yield enough information to address the needs or concerns that this process requires.

More simply,  Due Diligence is the verification of representations and claims made by one party to another in an economic transaction. It is not only a process to gather, check, discover, and verify information provided, but it is also a process to identify unforeseen risk as well. This requires the experience and judgment to know when, where, and how to further to uncover what hasn’t been disclosed.

There is a tendency for some organizations to review and place trust in accounting or other furnished records, without physically examining either the actual facilities or the political, corporate, and economic relationships of the owners, principals, or counterparties to the transaction. The reality is that business practices, legal procedures, and infrastructure are still in transition in many areas, with many pitfalls and problems associated with less-developed economies.

Due Diligence is not a pass-or-fail process, nor is it always facilitated by a quick search on the internet. It calls for experience and judgment to know when to explore further, as well how and where.

We have performed Due Diligence investigations in 6 continents – this is not a side line, this is one of our core compentncies.

Services include:

  • Senior executive and key employee background investigations
  • Detailed analysis of entity ownership, control and dominion
  • Asset verification
  • Enhanced Due Diligence
  • Local expertise and subject matter expertise – in multiple jurisdictions
  • Real Information for Real Decision Makers – period!

In short the losses and wastes of time talent and treasury can be stopped with creditable and experienced due diligence by Due Diligence Professionals – so certitifed.

 

 

CASE STUDY

 
Client was looking to acquire a middle eastern distributorship of tiers and automotive parts. We were retained to look at the books – beyond what the accountants had done and check, in a general fashion, the background of the business operating in four middle eastern countries. While we found significant discrepancies between what the accountants had reporter and current inventory, this was not intentional but due to a combination of sloppy inventory control and slow reporting of sales. We also found that one of the shareholders was the brother of a specially designated national – in short a person on the terrorist watch lists. We also found that the bad brother had used the good brother’s name on more than one occasion. While, as we were lead to understand, lead to a significant family dispute, we were concerned with any potential liability to a new owner of the company. Thus alerted, the lawyers involved in the transaction understood to what needed to be done to both consummate the purchase and disclose and isolate the good brother from the bad brother so as to avoid legacy issues for the company or direct OFAC fines or prosecution.