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Due Diligence

Simkover and Associates are chartered accountants with over 15 years of experience inside of large corporations. Simkover's chartered accountants have experience in a variety of backgrounds including manufacturing, retail and non-profit sectors. With this unique structure many of our clients have found this helpful when they are expanding their business or when they are in a state of structural change.

Buying a business can be an arduous but rewarding process. It can take weeks or months to complete. Because buying a business requires investing a fair amount of money and time, it is critical to do your homework. There are many steps involved in buying a business which include the business plan, resources and the search, due diligence, pricing and income tax considerations. Simkover and Associates have years of experience and expertise to assist you in many of these areas.

For example, the due diligence area includes a critical financial review of the target company's financial statements for the past several years, and a review of the financial projections for the coming years.

The financial statements and projections submitted to the client by the target company are often not audited by a reputable accounting firm, and therefore cannot be relied upon. When chartered accountants (CA's) like Simkover and Associates are conducting due diligence on the financial statements and projections, we are providing the following benefits:

  • If we are asked to audit the financial results, we are providing assurance that the financial statements (sales, gross profits, expenses and net after-tax profit) fairly present, in all material respects, the results of operations of the company in accordance with Canadian generally accepted accounting principles
  • On this basis, we are helping to determine whether the proposed purchase price is reasonable or excessive
  • We will examine the latest interim financial statements to determine the most recent trends in the target company
  • Current trade accounts receivable and payable analysis will tell us if we can place reliance on significant customers and/or suppliers
  • Terms and conditions of current and long-term bank debt are scrutinized to ensure that inherited loans are affordable
  • Analysis of sales and cost of sales by product line to assess the target company's growth prospects
  • Recent income tax returns reveal whether there are income tax benefits that could be utilized after the purchase of the company
  • Critical contracts are examined to determine if there are contingent liabilities that the purchaser may become responsible for
  • An analysis of existing information systems will tell us whether they are compatible with the purchaser's systems, or whether costly conversions will be required
  • Employee analysis, including remuneration levels and benefits, lets us know whether the number of employees appears excessive relative to the size of the operation, and whether there are expensive benefit plans that would be difficult to remove
  • Other operational analysis includes: production capacity, age and technology of equipment, quality control, R&D costs, sales personnel and their remuneration structure, market share and competitors, insurance program including exposure and risk, and environmental concerns

If you are thinking of purchasing or investing venture capital into a small business, due diligence will need to be conducted. Let us do the homework -Contact Simkover and Associates today.

Due Diligence - Simkover and Associates Chartered Accountants

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