Due diligence scope: what we check and what you get
Due diligence before buying a business is for an investor who plans to acquire a company, a share in an LLC or a property complex and wants to know exactly what they are buying. The seller shows the business from its best side, while hidden debts, tax risks, expired leases and title problems come to light only in an independent review. In international practice due diligence precedes almost every business acquisition.
If the deal itself is not decided yet, start with the page on audit for buying and selling a business.
The client receives a report listing the risks, their monetary assessment and recommendations on the price and terms of the deal. MK Audit has performed pre-acquisition reviews for more than 20 years, and in many cases after our report the seller reduced the price or the buyer walked away from a loss-making deal. The report is prepared in Ukrainian and English.
What is included
- Legal due diligence: constituent documents, title to shares, permits, licences, rights to real estate, land, equipment and trademarks, court cases and claims, consent of other shareholders to the disposal.
- Financial due diligence: quality of the financial statements, existence of assets and liabilities, profitability, structure of income and expenses, dependence on key customers, cash flow analysis.
- Tax due diligence: correctness of VAT, corporate income tax, personal income tax and social contributions, exposure to additional assessments for the seller’s period, status of settlements with the budget. For companies with related parties we review controlled transactions.
- Inventory: physical existence of property, stock, receivables and payables, reconciliation with the balance sheet.
- Operational and HR review: management structure, key staff, employment contracts, the sales system.
- Recommendations on the price, the deal structure, seller’s warranties and remediation of the issues found.
Who needs it
- foreign and Ukrainian investors buying an operating company, a manufacturing plant, a retail chain or a service business;
- LLCs buying a partner’s share or acquiring a competitor;
- representative offices of foreign companies expanding in Ukraine by buying a local business;
- banks and investment funds before financing a transaction;
- non-profit organisations and charitable foundations taking over a social enterprise or the property of another organisation, or selecting a partner for a donor-funded project; such a partner review complements a grant audit;
- sellers who want to go through the review before the buyer does it.
Scope of the review
| Option | What we review | When it fits |
|---|---|---|
| Express review | Registers, court cases, financial statements, key contracts, main tax risks | A small company, limited time for a decision, preliminary screening of targets |
| Tax due diligence | Detailed review of taxes for two to three years, calculation of possible additional assessments | A company with high turnover or VAT, risk of a tax inspection after the change of owner |
| Full due diligence | Legal, financial and tax review, inventory, HR, operations | Purchase of a plant or property complex, a large deal value |
How the work proceeds
- Request and proposal. You describe the target, the deal value and the timeline. Within 1 day we send a proposal with the scope of the review.
- Contract and checklist. We sign a confidentiality and engagement agreement and send the seller the document list and the inventory plan.
- Execution. We work with the documents, visit the site, perform the inventory, interview management and check the registers.
- Result and support. We deliver the report with risks and recommendations, discuss it with the buyer and, if needed, take part in negotiations with the seller. Our lawyers can then run the deal as part of legal support for buying a business.
Documents you will need
- charter, register extract, minutes of meetings, ownership structure;
- financial statements, trial balances and tax returns for two to three years;
- reconciliations with the tax authority, statements of settlements with the budget;
- list of fixed assets, title documents for real estate, land and vehicles;
- contracts with customers, suppliers, banks and landlords;
- licences, permits, trademark certificates;
- staff list, employment contracts, information on salary arrears;
- list of court cases, claims and enforcement proceedings.
Timing
An express review takes one to two weeks; full due diligence of a small company takes three to six weeks. The timeline depends on how quickly the seller provides the documents.
Leave a request in the form below: a commercial proposal after we review the task, reply within 1 day.
How does due diligence differ from a regular audit?
An audit confirms that the financial statements for a past period are reliable. Due diligence answers the buyer’s questions: what they are buying, which risks they take on and what it is really worth. The report contains not an opinion on the statements but a list of problems with their impact on the price.
Can the review be done without the seller’s knowledge?
Partly. Registers, court cases, public financial statements and reputation can be checked without the seller. A full review requires access to internal documents and the site.
What if tax risks are found?
We estimate the possible additional assessments and propose options: a price reduction, deferred payment, seller’s warranties, buying assets instead of shares, or walking away from the deal.
Do you prepare the report for a foreign investor?
Yes, the report is prepared in Ukrainian and English with an explanation of the specifics of Ukrainian law. We are a member of DFK International and are used to working with foreign clients.