In order to thoroughly review a merger or acquisition candidate, it is necessary to initiate a
Due Diligence process. Due Diligence is initiated after a target is engaged and after the target accepts a Letter of Intent (LOI). During the Due Diligence process, an acquirer and the target typically enter a 30-60 day exclusivity period in which the acquirer has the ability to ask any and all questions necessary to understand the target’s business. These questions include but are not limited to subjects related to the target’s customers, products, sales trends, profitability, balance sheet items and employee matters. Each answer received provides important insight on what the potential target is worth as well as any issues or risks that the acquirer should be aware of.
SPX provides a proprietary framework and a method to manage and analyze the results of the Due Diligence process. The firm strives to make this process as efficient and effective as possible, providing clients with access to insight and analysis that can dramatically impact the way in which a merger or acquisition is valued. SPX also builds customized valuation models for each engaged target to determine what the acquisition target is worth as a stand-alone and as an integrated entity. The value of potential synergies are also calculated and embedded in the model. Valuation overall plays a key role in how much an acquirer pays for a target and it estimates the Return on the Investment from the transaction.