The due diligence process
To assess the initial commitment for a potential investment in a platform/target company, we thoroughly review the commercial, financial, and legal situation of said company using data supplied by the target and other collected from the market. External advisers including, lawyers, auditors, and when warranted, business consultants are retained, along with the direct involvement of our Investment Advisory Team, to probe and investigate business prospects, financial performance, management experience, legal contingencies, competitive advantages, challenges and risks of any platform/target company.
This comprehensive process covers, among other things, the following additional issues relating to the platform/target company and its management:
- Forecasts, and budget techniques used and accuracy of past forecasting,
- Management structure, board composition, key shareholders,
- Business model, concentration risks, diversification plans,
- Internal disclosure & reporting procedures, IT and ERP systems,
- Key employment contracts, incentive plans; and
- Litigation, legal structure, regulatory environment.
Once the financial & legal due diligence processes are complete, the terms of the deal can be finally negotiated including the form of investment (purchase of stock or capital increase), the value/pricing of the capital stock and the stake to be held by Growthgate. Technical closing would follow with lawyers drawing up the final version of the transaction documents including, the Sale and Purchase/Subscription Agreement and the Shareholders’ Agreement (or variations thereof), which after execution, become legally binding documents on all parties. Financial closing, ensues when consideration is exchanged between the parties.