Romania’s M&A Landscape: Best Practices for Due Diligence Emerge
The complex nature of mergers and acquisitions (M&A) in Romania makes the due diligence process a time-consuming endeavor that can take anywhere between several weeks to several months. However, with the right approach, companies can ensure a smoother and more successful transaction.
Assembling the Due Diligence Team
According to experts at Oglinda & Partners, the first step in the due diligence process is to assemble a team of specialists responsible for conducting the entire investigation. This team typically comprises:
- Investors
- Accountants
- Lawyers
- Personal consultants
- Other service providers as needed
Gathering Essential Documents
Once the team is assembled, they must gather essential documents from the target company. A list of necessary documents is created, along with corresponding timeframes for delivery. After signing a non-disclosure agreement, the due diligence team may request this information from the target company.
Meetings between the buyer and target company can also be organized to discuss the M&A process and requirements for necessary documents. These meetings allow both parties to determine compatibility and ensure the buyer is satisfied with their investment.
Key Domains to Cover
The types of documents requested during due diligence vary depending on the business and its scale. However, experts recommend covering key domains such as:
- Legal
- Economic
- Corporate and commercial
- Fiscal
- Intellectual property
- Past and pending lawsuits
- Public authorizations
- Shareholder information
- Insurance
- Leasing contracts
- Financial data
Analyzing Gathered Documents
It is crucial for buyers to thoroughly understand the target company’s financial situation, asset state, legal aspects, and strategy. If any issues arise, the transaction can be cancelled.
The next step involves analyzing gathered documents and addressing concerns. If concerns remain unanswered, buyers may demand additional information. The due diligence team must establish whether identified issues warrant cancelling the transaction or adjusting the purchase offer.
Regular Meetings with the Target Company
To expedite the process, regular meetings with the target company are essential to address concerns in a timely manner. Once satisfied with provided information, buyers can proceed with writing the due diligence report and sending it to the target company for approval.
The Due Diligence Report
The report should summarize all issues identified during the due diligence process and domains taken into consideration. Following its completion, buyers must conduct a final assessment of the transaction:
- If issues are minor, the M&A process can continue as planned.
- Buyers may demand adjustments based on findings.
- If challenges cannot be overcome, the purchase is cancelled.
Experts’ Take
Experts at Oglinda & Partners stress the importance of thorough due diligence in Romania’s M&A landscape. By following best practices and ensuring a comprehensive investigation, companies can avoid costly surprises and ensure a successful transaction.