Jack Clipsham, Partner heading Mazars Asia-Pacific Corporate Finance, talked to George Russell for his M&A due diligence article "Know your target" and gave several expert recommendations, notably:
Revenue recognition and cash reconciliations
[...] Reconcile cash deposits from bank statements to revenue. “There is often an early recognition of revenues and inclusion of one-off gains as recurring revenue,” [...]
[...] make sure all parties understand the documentation, especially if it requires a translation. “Language itself can also be a challenge – both oral and written,” [...]. “The Chinese language does come from one of the world’s oldest cultures and possesses an eloquent tradition rich in ambiguities.”
Jack further shares that a new stumbling block that many carrying out due diligence are increasingly facing is sellers giving critical information only to certain suitors. “It is becoming very difficult to get the more valuable commercial information before entering an exclusivity phase when a preferred buyer gets access to management. Such a preferred-party system might require a phased approach to the due diligence. Initial due diligence might ensure key concerns and potential risk areas are covered, but full due diligence wouldn’t be engaged unless the parties were seriously involved, enabling potential acquirers to control associated costs."
Lastly, Jack advises that CPAs should not be silent if a deal might not be in the best interests of the acquirer. “Raise the issues with the advisers to the company on the deal. If concerns persist and no action has been taken, concerns should be formally documented and circulated to all board members.”
To read the full article, please click here.
- Article published in A Plus Magazine, January 2013 issue
- Article by George Russell