Due diligence in mergers and acquisitions is the process of carefully evaluating a potential business deal by gathering financial, legal, intellectual, and other important information from the other party. The goal is to identify any hidden issues or risks before moving forward with the transaction. By conducting due diligence, a clear strategy can be developed to ensure the merger or acquisition is successful.
Due diligence is the first crucial step in the M&A process and helps to understand key aspects of the company, including:
The company’s capital structure and shareholding pattern
The composition of the board of directors
Any shareholder agreements or restrictions on shares, like voting rights or transfer rules
The company’s level of debt
Whether any assets are used as collateral for loans
Significant contracts the company is involved in
Status of required approvals, consents, or filings with authorities
Employee details
Any major ongoing or potential legal issues
The company’s intellectual property
Other existing or potential liabilities.
A business plan is a formal document that outlines a company’s goals, why those goals are achievable, and how they plan to reach them. It may also include background information about the organization or team working to achieve those goals.
Objective:
To raise capital or debt
To help investors make informed investment decisions
To structure business deals
For future planning by top management
To determine the company’s capital needs
We take full responsibility for preparing business plans based on input from the management, covering areas such as:
Revenue and costs
Employee details
Working capital, including stock, debtors, and creditors
Proposed leverage ratio
Historical financial statements
ESOP planning
Transaction structuring
We provide a variety of solutions for our clients, including services for captive centers, young entrepreneurs, and next-generation family businesses.
Tax Planning – Corporate & Non-Corporate
Tax planning is a crucial part of financial management, aiming to minimize tax liabilities while ensuring compliance with the applicable tax laws. Effective tax planning involves analyzing the financial structure of both corporate and non-corporate entities and identifying strategies to optimize tax obligations.
For corporate entities, tax planning involves a strategic approach to managing taxes at both the company and group level. It aims to optimize the use of tax laws to reduce tax liabilities, improve cash flow, and enhance the company’s financial position. Key areas of corporate tax planning include:
Choice of Business Structure: Deciding whether to form a private limited company, public company, partnership, or LLP, based on tax implications.
Capital Structuring: Balancing debt and equity in the business to minimize taxes, as interest on debt is deductible, while dividends on equity are not.
Tax Incentives and Exemptions: Utilizing tax incentives available under various sections of the Income Tax Act, such as deductions for R&D, depreciation, investment-linked incentives, and exemptions for start-ups.
Transfer Pricing: Ensuring that transactions between related parties, such as subsidiaries or affiliates, are priced in a way that aligns with international tax standards and complies with the arm’s length principle.
Tax Loss Carryforward: Planning for the carryforward of business losses to offset future profits, which can reduce tax liabilities in profitable years.
Non-corporate tax planning applies to individuals, partnerships, sole proprietorships, and other non-corporate entities. The focus is on maximizing available tax exemptions, deductions, and credits. Key areas for non-corporate tax planning include:
Income Splitting: Dividing income among family members to take advantage of lower tax brackets.
Tax Deductions: Maximizing deductions under sections such as 80C, 80D, 80G, and others, which include deductions for investments, insurance premiums, medical expenses, and charitable donations.
Capital Gains Planning: Managing capital gains taxes by holding assets for the required period to benefit from lower long-term capital gains tax rates.
Tax-efficient Investment: Choosing tax-efficient investment options, such as tax-free bonds or investing in tax-saving instruments under Section 80C.
GST Planning for Service Providers and Traders: Structuring the business model to minimize GST liabilities, using exemptions and schemes offered under GST laws.
A Private Limited Company is a type of business structure that limits the liability of its shareholders to the extent of their investment in the company. It is a separate legal entity from its owners, meaning it can own property, enter into contracts, and be sued in its own name. This type of company is typically suitable for small to medium-sized businesses and can have a minimum of two and a maximum of 200 shareholders.
A Public Limited Company is a business structure where shares are offered to the general public and can be traded on stock exchanges. It is a separate legal entity with shareholders having limited liability, meaning their personal assets are protected, and they can only lose the amount they invested in the company.
Key features of a public limited company include:
Limited liability: Shareholders’ liability is limited to the value of their shares.
Shares available to the public: Shares can be bought and sold by the public through stock exchanges.
Greater capital raising ability: Public limited companies can raise significant capital by issuing shares to the public.
Regulatory oversight: Public companies are subject to strict regulatory requirements, including disclosures, audits, and regular filings with authorities like the Securities and Exchange Commission (SEC) or equivalent bodies.
Larger shareholder base: These companies can have an unlimited number of shareholders.
A One Person Company (OPC) is a type of business structure that allows a single individual to operate a company with limited liability protection. It is a separate legal entity, which means the owner’s personal assets are protected from business liabilities.
Key features of a One Person Company include:
Single shareholder: Only one person can own and run the company.
Limited liability: The owner’s liability is limited to the amount invested in the company.
No need for a partner: Unlike other companies, an OPC does not require a second shareholder or partner.
Separate legal entity: The OPC is considered a distinct entity from its owner, allowing it to enter contracts, own property, and be sued in its own name.
Less compliance: Compared to private or public companies, OPCs have simpler compliance and reporting requirements.
A Limited Liability Company (LLC) is a type of business structure that combines the flexibility of a partnership with the liability protection of a corporation. In an LLC, the owners (called members) are not personally liable for the company’s debts and liabilities, meaning their personal assets are protected.
Key features of an LLC include:
Limited liability: Members’ liability is limited to the amount they invest in the company.
Flexible management: LLCs can be managed by members or appointed managers, offering more flexibility compared to corporations.
Pass-through taxation: LLCs often benefit from pass-through taxation, meaning the company’s profits are taxed only at the individual level, avoiding double taxation.
Fewer formalities: LLCs have less stringent regulatory and reporting requirements compared to corporations.
Ownership flexibility: LLCs can have one or multiple members, and the ownership structure can be easily changed.
Startup Registration is the process of officially recognizing a new business venture as a legal entity. In many countries, including India, startups can register under various schemes that offer benefits such as tax exemptions, funding support, and ease of doing business.
Key steps involved in startup registration typically include:
Choosing a business structure: Deciding whether the startup will be a sole proprietorship, partnership, limited liability company (LLC), or private limited company.
Name approval: Registering the startup’s name with the appropriate authorities.
Obtaining necessary licenses: Depending on the nature of the business, certain industry-specific licenses or permits may be required.
Tax registration: Getting a tax identification number (such as GST registration or PAN).
Compliance with legal formalities: Filing necessary documents, including a memorandum of association, articles of association, and other required paperwork.
Corporate Registration is the formal process of registering a business as a legal entity under the applicable laws of a country, such as the Companies Act. This process is essential for establishing the business as a separate legal entity, distinct from its owners, and allows it to conduct business legally, enter into contracts, and be liable for its debts.
Key steps in corporate registration typically include:
Choosing a business structure: Deciding whether to register as a private limited company, public limited company, limited liability partnership (LLP), or other legal forms.
Filing incorporation documents: Submitting documents like the company’s memorandum of association, articles of association, and details of shareholders and directors.
Name approval: Getting approval for the company name from the relevant authorities.
Obtaining registration certificates: Receiving a certificate of incorporation and other official documentation confirming the business’s legal status.
Tax registration: Registering for taxes, such as GST or PAN, depending on the jurisdiction.
Business and Share Valuation is the process of determining the financial value of a business or its individual shares. This is essential for making informed decisions during mergers, acquisitions, investments, or shareholder disputes. The valuation helps to assess the true worth of a business or its shares based on various financial factors.
Key methods used in business and share valuation include:
Income-based valuation: Estimating value based on the company’s earnings, such as through discounted cash flow (DCF) analysis.
Market-based valuation: Determining value by comparing the business to similar companies in the market.
Asset-based valuation: Assessing value based on the company’s assets, such as real estate, equipment, and intellectual property.