Value of forensic audit added in M& transactions A
Merger and acquisition processes involve not only growth potential and synergies but also significant legal, financial and reputational risks. A standard due diligence study often identifies major operational, tax or regulatory risks. However, only the application of the investigative audit methodology allows for an in-depth analysis of areas particularly vulnerable to fraud, financial irregularities or illegal activities.
The inclusion of forensic services in due diligence enables verification of information that may not be disclosed in standard transaction documents, including potential cases of manipulation of financial results, conflicts of interest, undisclosed obligations, corrupt actions or violations of internal policies and procedures.
Advantages of using forensic analysis in the M&A process:
Identification of hidden risks – analysis of transaction and operational data for warning signals (red flags) that may indicate abuse or non-standard activities of the board.
Verification of the integrity of financial data – assessment of the reliability of financial statements, including potential manipulation of revenues, costs, reserves or liability structure.
Assessment of legal and regulatory risk exposure – detection of potential infringements of anti-money laundering (AML), collective liability laws, etc.
Support in transaction negotiations – knowledge of identified irregularities may form the basis for:
- renegotiation of transaction terms (e.g. reduction of purchase price),
- suspension or withdrawal of transactions at significant risks.
Why is it worth using external forensic advisors?
The commission of forensic analysis to an independent entity provides objectivity, access to specialised analytical tools (including data analysis and e-discovery) and experience in conducting economic investigations. Equally important, such an audit may be conducted in a discreet and timely manner – without disrupting the trading schedule.