Understand Due Diligence Services in Dubai & the UAE

Due Diligence

Financial due diligence is one of the standard terms used in financial parlance. The demand for due Diligence is increasing because of the rapid industrial growth.
Businesses are entering uncharted territories, and fraudulent acts occur. Businesses greatly benefit from financial due diligence services in UAE. It summarizes all the significant aspects concerning the matter under Diligence.

What is Due Diligence?

Due Diligence ProcessDue diligence is a review or investigation conducted by someone to satisfy himself as to the genuineness of the matter and parties under consideration before entering into a legally binding contract, agreement, or transaction.

It saves one from unnecessary issues arising later. A little homework at the initial stage saves one from a significant misfortune. It gives the required confidence and understanding about the parties to a transaction and related various aspects.

Due Diligence – Know the sub-categories within it.

There are various types of due diligence, which are exercised based on the situation, institution, and requirements. Due diligence gives businesses the knowledge and confidence to learn about the subject matter.

Dubai’s due diligence services can help you know about the actual value of a business transaction and save companies from potential losses. It provides a way to empower your business-related decisions.

The major Due diligence processes are associated with business aspects such as Mergers and acquisitions (M&A), financial, customer, vendor, and commercial Due diligence services.  These business aspects are interlinked and deliver information on all the areas.

A significant advantage is information collected from one business aspect can be helpful for another. Let’s have a look at different types of due diligence services in the UAE:

M&A Due Diligence

There are two possibilities when merger and acquisition Due diligence is conducted:

  1. When two companies wish to merge into a single entity
  2. When one company wishes to acquire another

It helps businesses know whether the deal will be beneficial for them. It helps one understand all the essential information about the target, including its financials, customers, suppliers, technology, intellectual property, and liabilities.

Based on it, a business will adjust its expectations from the merger or acquisition process. It lets the buyer company know about the potential risks associated with the target business. It will also help the company define a clear structure after integrating the targeted acquisition.

Similarly, the seller also conducts M&A due diligence on the buyer to understand his profile, financials, and capabilities to execute the deal.

Customer Due Diligence

Customer due diligence is one of the most sensitive and critical services. In many countries, companies are bound by the law to conduct it. This service is necessary to avoid money laundering and terrorist financing. If the companies do not follow all the measures, they may be declared non-compliant and mad to pay penalties.

The level of due diligence depends on the nature of a business and the company’s relationship with the client. Companies apply a risk-based approach to it and carry out enhanced Due Diligence for customers in the high-risk category.

Vendor Due Diligence

Vendor Due Diligence aims to gain reasonable confidence that the vendor is financially capable and its proper corporate governance processes. Businesses perform vendor Due Diligence before entering into any agreement or contract with them. This agreement could be for the supply of raw materials, information technology, or services, and it helps minimize compliance risk and reputation risk.

It is an ongoing process. Companies need to analyze their relationship with the vendors yearly to know about the structural changes that might have happened at the vendor’s end. It helps one structure a better deal and save oneself from unwarranted risks.

Third-Party Due Diligence

The third-party due diligence service is introduced due to strict anti-bribery laws. The company needs to prove that they have taken enough efficient anti-bribery measures.

It is conducted when a company plans to outsource its work to external companies. The Due diligence process helps identify the risks involved and the chances of corruption. It collects essential data such as company structure, reputation, operational info, and ownership.

It helps ensure that the third parties employ ethical business practices, have robust policies and procedures to protect confidential information, mitigate risks, and have the proper infrastructure to provide a sustained service.

Financial Due Diligence

The financial due diligence process primarily focuses on identifying the actual financial picture of the company. The financial data is scrutinized in this process, and the areas where potential risks lie are identified.

It involves a thorough check on fixed, variable, profit margins, internal control framework, and significant customer accounts.

Based on the financial diligence report, the buyer acquires knowledge about the company’s financial history and current performance, and it even helps him forecast future growth and investment.

Commercial Due Diligence

The commercial Due Diligence deals with the broader aspect compared to the financial one. Through this process, a private equity firm estimates the commercial attractiveness of a company.

In addition to the company’s financial health, it also focuses on the internal and external environment of the targeted company.

Through the Commercial Diligence report, one can gauge its performance and meet the target. It also presents the potential problems that the buyer may face due to the acquisition.

Legal Due Diligence

Legal Due Diligence is nothing but an investigation of the legal aspects of a transaction. Accordingly, the entity’s legal structure, contracts and agreements, assets and liabilities, contingent liabilities, and pending legal proceedings are explored.

It ensures that all the legal risks associated with the transaction are identified and suitably classified.

Operational Due Diligence

Operational Due Diligence aims to understand the operational aspects of a company. To understand its operational efficiencies, it is vital to analyze its day-to-day functioning, business processes, procedures, and internal controls.

It helps evaluate whether the company’s internal structure is flexible enough to fit into the buyer’s business. It highlights process improvement opportunities and performance gaps.

Significance and advantages

Due Diligence is a vital element of every business deal, whether between two different businesses or between a business and a client.

It helps ascertain the actual value of the target company, and it saves the company from making a wrong investment and facing losses. When it is conducted, it will look at the operational and financial details of the company providing the idea to the buyer regarding the growth and financial stability of the company.

There are several compliance-related requirements associated with it. Furthermore, it is also essential to remain compliant with anti-bribery laws, anti-money laundering regulations, and counter-terrorist funding.

For that reason, companies even conduct KYC checks, ensuring that the customer is reliable and has provided truthful information. This also assures that an entity is not exploited by getting used for criminal activities.

It helps in ascertaining the viability of a transaction, knowing the skills and capabilities of the employees of the target company, assessing the technological framework of the company, and creating synergy between the companies for achieving the organizational goal.

Due Diligence is a risk management tool for companies entering into a business transaction, and it helps to make an informed decision and avoid surprises later.

Due Diligence Service

Due Diligence Services in Dubai: FAQs

1. How long does the Due Diligence take?

The time required to conduct the complete Due Diligence varies according to the business’s scope of work and complexity. Generally, customer Due diligence takes lesser time than the one conducted for a whole company.

2. How does a Due diligence process start, and how does it end?

It starts only after both the parties (buyer and seller) sign a letter of intent (LOI), and it ends when both the parties sign a definitive purchase agreement.

3. What is the significance of the “Quality of Earnings Report?”

The quality of the earnings report provides a complete picture of the company’s revenue and expenses. One can verify if investing in the targeted company is worthy or not.

Due Diligence Service in UAE

N R Doshi & Partners provides Due Diligence Service in UAE to safeguard your interests and helps you comply with legal requirements. We use our proprietary ethical and non-intrusive methods with the highest standards of integrity and accountability in all related Due Diligence assignments.

Identify critical issues early and protect your business interests with our top-notch Due Diligence Services in UAE. Our Due Diligence Report helps you make an informed business decision and saves you time and costs, and it highlights the outcome supported by our findings and recommendations. Contact us now to get in touch with our consultants and answer all the questions related to our Due Diligence Services.

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