5-3. Key focus area of due diligence: FINANCIAL
Projection
Expected financial results of FY2015 (as comparison of 6 or 7 months closing)*
Preconditions and background data of the management case (5-Year Financial Projection)*
Profitability
Profitability and cash-flow analysis*
Validity of key adjustment items presented in Confidential Information Memorandum*
Major customers list of each business and concentration analysis (ABC analysis)*
Utilization of management accounting systems*
Sales data and major customer base*
Market share analysis
Major marketing activity
B/S-related
Working Capital analysis*
Presence / absence of assets and debts *
¾Off-balance-sheet debt such as shortage of reserve for retirement allowance
¾Guarantees for obligation/debt
¾Derivatives trading
Presence / absence of bad assets / inventories*
Market value of real estate (if simplified evaluation method is available)*
¾Assets to be curved out should be scrutinized
Depreciation of assets (mainly trucks)*
Historical changes of the stockholder
HR-related
Compensation system for employees, retirement bonus, details of fringe benefits*
Personnel evaluation and salary / promotion system
Historical number of staffs and job-quitting rate
Past layoffs resulting from corporate restructuring (if any)
Tax-related
Scrutiny of tax preparations of each fiscal year*
Scrutiny of reporting situation to the taxation office*
Scrutiny of accounting books / papers and various evidences*
Scrutiny of major internal documents*
*Particularly important questionB/S-related
Working Capital analysis*
Presence / absence of assets and debts *
¾Off-balance-sheet debt such as shortage of reserve for retirement allowance
¾Guarantees for obligation/debt
¾Derivatives trading
Presence / absence of bad assets / inventories*
Market value of real estate (if simplified evaluation method is available)*
¾Assets to be curved out should be scrutinized
Depreciation of assets (mainly trucks)*
Historical changes of the stockholder
HR-related
Compensation system for employees, retirement bonus, details of fringe benefits*
Personnel evaluation and salary / promotion system
Historical number of staffs and job-quitting rate
Past layoffs resulting from corporate restructuring (if any)
Tax-related
Scrutiny of tax preparations of each fiscal year*
Scrutiny of reporting situation to the taxation office*
Scrutiny of accounting books / papers and various evidences*
Scrutiny of major internal documents*
*Particularly important question
Basic Issues
Substantiality of intra-group transaction relationships
Organizational structure and capability for financial and accounting matters*
¾“Do they have enough capability to respond as TRANCOM’s consolidated subsidiary?
Points to be checked for the Post-merger
Financial impact of consolidating 4 target companies