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Due Diligence Report
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15 May, 2021
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15 July, 2021
Due diligence reports can help stakeholders and business partners determine a company’s value and therefore, facilitate making well-informed financial and strategic decisions.
Table of Contents
What is a due diligence report?
Due diligence Report ( or DD report) is a comprehensive technical document whose main purpose is to assess a property or a company and its financial data in detail. Since it’s used during real-estate purchases and company acquisitions, it is also widely known as an Acquisition Report.
The due diligence Report represents a meticulously made record of existing features of a property, emphasising both its highlights and drawbacks; its current condition, and a summary of potential maintenance work over the course of the life of the property, or at a specific time. This report aims to detect any potential liabilities or financial risks for companies and investors on time before making the purchase.
At Property & Building Investments, we have helped numerous companies with our expert financial advice and helped them make better decisions for their businesses.
The Importance of DD report
If you’re trying to sell or buy a property or make a new acquisition project, having a due diligence Report is a very practical asset. It is a vital project risk management tool, as it helps assess and manage all risks associated with making a major financial decision.
As we mentioned above, the TDD report will detail all the positive and negative aspects of a property, as well as possible risks, both to you and potential investors. It is required for evaluating the accuracy, commercial integrity, financial stability, and functional competence integrity. It provides clarity of the risks that are associated with ownership and occupancy of property assets from a technical perspective.
How does the due diligence process look like?
A perfect time to do due diligence is when a buyer has established the intention to buy a property, but no formal contract has been signed yet. The company interested in purchasing should create a list with all the data they need and why it’s important for the transaction. Therefore, the company may require reviewing customers’ records, and financial data or checking potential liabilities.
A company interested in purchasing a property can hire building consultants to facilitate this process and collect all relevant data. The company subject to purchase has any lawsuits or other legal issues.
Since the due diligence process deals with some delicate and private data, this process is often performed by sighing the non-disclosure agreement.
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When to use the report?
Due diligence reports have an important role during mergers and acquisitions, assessing potential investments’ profitability or calculating the potential capital improvements of investments. The TDD report is primarily prepared in case of one of these scenarios:
- Property or asset merger or acquisition
- Property or asset occupation
- Property or asset disposal
- Property or asset development
What to include in the report?
The elements of the due diligence report can vary greatly depending on the industry, investment or purpose. However, the report should include some essential elements:
- financial information about the company, including financial statements, tax returns, financial projections, capital structure, revenue and profit margins
- information about the company’s employees, such as contracts, job descriptions, pay records and work experience of people in top positions at the company
- legal information, such as contracts, previous lawsuits, joint venture and licensing agreements and permits
- information about stakeholders, such as customers, suppliers and other partners in the supply chain
- information about the assets of the company, such as real estate owned or leased, facilities and intellectual properties
Types of due diligence reports
Different types of DD reports differ in their structures, data, forms, and purposes. Some of the more frequent DD reports include:
- Financial due diligence Reports
- Legal due diligence Reports
- Administrative due diligence Reports
- Merger and Acquisition due diligence Reports
- Customer due diligence Reports
- Vendor due diligence Reports
Due diligence reports checklist
Depending on the type of report, there are certain vital elements that need to be included to make the report valid:
- financial statements
- agreements, licenses and franchises
- capital structure and capital assets
- legal documents
- payrolls
- financial projections
- products or services
- SWAT analysis
- financial projections
- tax information
- regulations
- market research
- suppliers
- intellectual-property
- company procedures
Who prepares due diligence reports?
Numerous stakeholders and company members can participate in creating and distributing due diligence reports. These reports can be created by in-house company finance and law experts. Also, companies can hire external independent consultants such as quantity surveyors, investment bankers and specialised accountants.
Writing a due diligence report
When writing a due diligence report, it’s helpful to be mindful of the following things:
- know your audience and include only the data that will be useful to them
- focus on the objectives of the report
- don’t include too many details as it can be confusing and overwhelming
- use due diligence report templates
- be patient, focus on details and do your in-depth research
Writing a due diligence report might not be an easy task. Take your time and do thorough research since the quality of the data will impact the value of the report for your clients.
How can we help you out
DD reports are made for specific use cases. For each property, the reports need to be custom-made to tackle that exact use case. To make sure that all the risks are detected, cost estimations are made and all the aspects of your future asset are addressed.
Our technical due diligence service includes:
- Analysing the client’s brief and defining the required service
- Sharing advice on what elements of property should be inspected
- Services evaluation
- Detailed examination of all provided documentation, including both technical and legal ones>
- An accurate and comprehensive inspection of the property and/or land/li>
- Contact and coordination of potential sub-consultants/li>
- Preparation of the technical due diligence report, according to the RICS Best Practice Guidance Notes
- Communication with other members of the acquisition team (layers, agents, investment advisors, etc.)
- Communication with the Client’s legal team
- Post report meetings and advising with the Client
- Post report services may include additional re-inspections on demand, answering some new potential questions or concerns.
Contact us to discuss your project needs regarding due diligence reports and building consulting.
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Frequently Asked Questions
What is due diligence example?
For example, due diligence can be done in the following situations: a purchase of a new property, acquisition of a new company, assets development or reconstruction, implementation of new IT systems in organisations, etc.
What are the 4 due diligence requirements?
The four due diligence requirements are: Compute and Submit Form 8867, Compute the Credits, Knowledge and Keep Records for Three Years.
How to perform due diligence?
The due diligence process can be conducted in a few stages:
- Defining project goals
- Financial analysis and audit of the financial records
- A detailed inspection of documents
- Analysing the business plan of a target company
- Managing project risks
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