DUE DILIGENCE

Due diligence is the investigation or exercise of care that a reasonable business or person is normally expected to take before entering into an agreement or contract with another party or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target company or its assets for an acquisition.

The theory behind due diligence holds that performing this type of investigation contributes significantly to informed decision making by enhancing the amount and quality of information available to decision makers and by ensuring that this information is systematically used to deliberate on the decision at hand and all its costs, benefits, and risks. – From Wikipedia

WHY DUE DILIGENCE?

1. A CREDIT CHECK IS NOT ENOUGH

a. Our legal system many times takes months to reach the stage where a judgement or liquidation order is granted against a defaulter.

b. In this time people become desperate and the principle “to rob Peter to pay Paul” seems to become the new “normal.”

c. A naïve client is at some stage going to become the “Peter” and could face devastating consequences.

2. A SECRET CLOSET FULL OF UPSET CLIENTS

a. A service provider with upset clients generally would not like those deals to come to the attention of a new potential client. Unfortunately, that is exactly the information a new client needs to enable him/her to make an informed decision.

b. One can add a lot more value to the upset clients’ version than to those of the potential service provider/supplier offered in fancy marketing efforts.

3. CREATED PERCEPTIONS

a. In investigations, we have uncovered that the new service provider’s fancy car, offices, and expensive restaurants and he/she owes a lot of people money.

b. There are thousands of gurus guiding on how to create the best impression and dishonest people use this to create a persona of a successful business.

FLAWS IN CURRENT DUE DILIGENCE SERVICES:

1. TOO MANY POSSIBILITIES TO COVER

a. Entrepreneurs can own an infinite number of companies. – We have seen that they would normally use the “best-looking” one when doing business.

b. Current due diligence exercises would focus on the company presented to the client and not on the closet full of failed companies.

c. No matter how much a snake sheds the skin, it is still a snake… – Starting a new company when the old one failed does not mean that the new one will be successful.

2. DELAYS IN OBTAINING JUDGEMENTS

a. Many times, dishonest or troublesome entrepreneurs reach agreements with creditors to pay debts. This and the slow-moving pace of our legal system allows dishonest or people in serious financial difficulties to continue to operate, where they normally become desperate and defraud naïve clients.

b. The agreements reached would normally include a non-disclosure, which results in that very worrying information not being detected during a conventional due diligence exercise.

3. DUE DILIGENCE IS ENTRUSTED TO A COMPUTER

a. Service providers using only a computerised approach seems to fail to understand the computer principle of “garbage in – garbage out”.

b. A computer can only provide you with what is available on the data providing source. Upset customers, failed businesses, pending litigation and more important factors cannot be retrieved using only a computerised system.

OUR APPROACH

1. WE CHECK THE CONVENTIONAL INFORMATION:

a. Credit History

b. BEE Scorecards

c. Assets and Liabilities

d. Projected Figures

e. Regulatory Compliance

f. Insurances

g. Existing Litigation

h. And more

2. WHAT MAKES US UNIQUE, IS THAT WE COVER:

a. Social Media searches where we look for complaints, upset customers, threatened actions/litigations, and more.

b. Interviews using our skills as interrogators with existing clients, previous clients, employees, creditors, and more.

c. A study of the main role-player/s in the company where we focus on their history, previous successes/failures, public image, and more.

d. Compliance to the less known legislation, rules and more.

e. Detection and investigation of all the secrets the service provider/contractor do not want a potential client to know about.

Loading