Private equity

Evaluate deals 

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Financial and tax due diligence

Our financial and tax due diligence approach is to make an initial target assessment then design procedures appropriate to the specifics of the target's business and the quality of the information it has available.  We use sector specialists to focus on key issues and opportunities.  Typical procedures include:
  • Analyse historical and current-year trading results and financial position, historical cash flows and detailed working capital reviews to estimate funding requirements
  • Assess accounting issues for initial public offerings (IPOs) on any major global exchange
  • Review basis of preparation and key assumptions of forecast
  • Assess management information systems and find area of investment or cost-saving opportunities after the deal
  • Perform human resource reviews, identifying key employees and arrangements to retain and reward
  • Identify deal risks and propose how to deal with them in the contract
  • Review the tax compliance status of the target
  • Identify and assess potential tax risks and comment on how such exposures may be mitigated or addressed
  • Provide advice on the tax costs of the transaction and tax minimisation arrangements for the vendor and the buyer
  • Provide issues-focused reports, giving in-depth analysis of the issues that impact the deal

Commercial due diligence

Our Transactions Strategy Group is a team of strategy consultants who mainly serve PE clients and their portfolio companies in assessing China acquisitions and assisting portfolio companies develop and execute China strategies.

A typical commercial due diligence exercise will require a structured programme of primary research, interviewing customers, channel partners and competitors, to get an external perspective on the competitive strength of the target.  Procedures may include the following:
  • Assess the size and growth of the market, shares of competitors and the relative performance of the target
  • Identify the different business models of key competitors and assess which is most likely to be successful
  • Identify the core competencies required for success in the industry and benchmark against the target's competencies
  • Benchmark the sales organisation against competitor organisations, interview channel partners and end customers and assess the implications for future growth and performance
  • Identify if there are any regulatory changes pending that will impact the business of the target
  • Identify cost-saving and revenue enhancement opportunities

Deal structuring and valuation

  • Consolidate due diligence findings and recommendations
  • Provide advice on transaction considerations, in particular IPO accounting issues, GAAP differences and disclosure requirements of exchanges
  • Identify structural issues that may affect the transaction and propose solutions
  • Assist in drafting term sheets to take into account financial aspects of deal structuring with your legal counsel

Deal structuring tax advisory services

  • Following due diligence, the tax issues uncovered may be serious enough to force investors to consider alternative structures to mitigate identified risks, such as asset deal or carve-outs of unwanted assets and liabilities from equity deals.  Our tax specialists can help clients design alternative deal structures to manage risk and optimise the tax and financial structure of deals in the wider context of clients' global, regional and China tax profiles.
     
  • Advance consideration of the ownership and financing structure of an investment is critical to ensure global tax is minimised.  We can guide clients through the various planning techniques available to obtain a tax deduction for the cost of financing, through debt-push down or other innovative financing arrangements.

PE accounting advisory

The PE fund will need to assess its own accounting for the target and the target will need to prepare financial statements in accordance with local and other accounting standards and relevant regulations. The accounting issues arising from proposed pre-deal restructurings of targets are often complex and require early consideration. PwC's Global Capital Markets Group specialises in providing accounting advisory services to financial investors in connection with their pre- IPO investments.

Closing audit

We can provide audit services as part of transaction completion:
  • Review significant transactions between the date of due diligence and closing date
  • Perform closing audit

Operational Due Diligence

  • Analyse the target along the value chain
  • Assess the impact on the viability of the transaction
  • Assess risks involved
  • Identify synergies
Contacts
Roger Liu
Partner
Shanghai
Tel: +[86] (21) 2323 3951 Email
David Brown
Transaction Services Leader, Asia Pacific
Hong Kong
Tel: +[852] 2289 2400 Email