Due Diligence

Due diligenceDue Diligence is the term for the investigation or analysis of one or several features in a company. It is generally performed when an investor wants to purchase a company or group of companies. A Due Diligence lets the investor verify that the information provided is right and there are no concealed defects.


A Due Diligence usually comprises the following corporate areas:

This is one of a Due Diligence’s key issues, as it can involve a considerable impact on the economic figures. The first features to be analyzed are:

  • Corporate features: Such as the content of the deeds (company purpose, administrators, shares, keeping the Minute Book and the Membership Register, etc.)
  • Agreements: With providers and mainly with customers. It is significant to supervise the duration, contract and renovation conditions, established economic quantities, payments and collection periods, dunning and termination terms, commitments of both sides, etc. The agreements will critically define the society’s future cash flows and ratios, so they will affect the purchase price.
  • Risks of the company’s legal structure: Identification of possible inefficiencies in the legal structure to be purchased, such as: the inexistence of a parent or patrimonial company in the corporate group, lack of preparation of a business protocol, etc.
Regarding to a Due diligence, this feature involves the supervision of all the taxes presented by the company or groups in all the years open to review by the tax authorities, carried-out or in-process inspections, certifies of up-to-date tax payments. The first taxes to be revised are:

  • Corporate taxes: Together with the formal aspects of presentation, a profound review is performed placing emphasis on: amortizations, related-party transactions, tax losses, result corrections, non-deductible expenses, applied deductions, deferred taxes among others.
  • Personal Income Tax: Formal features and recalculation of the retentions made. Verification of the generated deduction certificates. Tallying of the amounts collected with the payrolls and the invoices emitted by professionals.
  • Value-Added Tax: Formal issues and recalculation of the applied quotes from the invoices that make up the tax. Data-cross references with the financial accounting and detection of possible differences.
  • Business Activities Tax: Formal issues and revision of the calculation performed by the local economic authority.

Moreover, an asset of the structure to be purchased is performed (to check that it is fiscally optimal or if there are previous changed to be implemented), in order to guarantee that there will not be any subsequent economic damages for the purchasing side.

Understood as the review of the relationship between the workers and the company or group of companies, and between the company and the labor-related public agencies.
The main issues the work focuses on are:

  • Collective Agreement: checking that it is being implemented in the company and if it is the right agreement for the carried-out activity. For groups of companies, all the agreements that could be implemented will be analyzed. The actualizations that the Agreement could have experienced and their implementation will also be checked.
  • Recruitment Procedures: This mainly refers to the review of the types of contracts carried out by the company (temporary, permanent, foreigners’ and disabled people’s contracts, etc.) and its data-cross with the implemented Collective Agreement. Review of the existing and finalized contracts. Recalculation of the occurred settlements and final payments.
  • Remunerations: Usual payment methods and filing of the guards signed by the employees. Procedure used by the company for their monthly recurring implementation. A comparison with the sector companies is made to determine if the salaries paid by the company or groups are in accordance with the market wages or there are any deviations.
  • National Health Service: Review of the inscriptions and variations produced in the last years open for review.
Analysis of the company’s financial situation to determine its future viability and help build the company’s or group’s final purchasing price. Generation of the main economic ratios and comments on their results.

All the gathered information is contrasted, as far as possible, with public agencies and registers. That means, with reliably information sources. Our Due Diligence report includes a section with recommendations to be implemented basing on the information gathered.

Due diligence services for SMEsIn LEIALTA we provide a complete Due Diligence service in order to make the investors’ decision-making process easier, giving them the most complete information as possible. Contact-us for further information.