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Due Diligence

 

Due diligence is process undertaken by potential investors to analyse and assess the desirability, value, risks and business potential of an investment opportunity.  The due diligence can cover the entire spectrum of operations of an investment sponsor or project, or it can focus on specific areas.

The following types are common areas of emphasis for due diligence studies:

  • Commercial due diligence

  • Vendor due diligence

  • Technical due diligence

  • Legal due diligence

  • Financial due diligence

  • Environmental due diligence

Navigator has specialised in due diligence since our foundation in 1995. To implement our projects, we rely on internal staff as well as sub-contractors for specialised fields. Legal due diligence is the sole area not provided by our firm using internal resources.

Our due diligence approach is based on four key tenets:

1. Clear Objectives: The due diligence process is based on a precise definition of objectives and parameters. We support our clients in defining project terms of reference and other parameters as closely and carefully as possible.

2. A Scientific Approach: As far as possible, we rely on the scientific method to document the existing situation, define the investment objectives, and then model the impact of the proposed investment and other competencies and capacities of the sponsor or investment in question. Our approach is rooted in empirical, replicable findings that lead to consistent results.

3. Objectivity: Our role is to provide an unbiased, professional opinion which is supported by evidence. Our reporting must be clear of bias or the influence of special interests. Where difference of professional opinion are found, we express these clearly.

4. Confidentiality: We take a full range of precautions to safeguard the integrity of client data. These included integrated data and document security and control policies. We offer encrypted communications and data storage facilities, and can comply with most corporate systems in this area.

Each Due Diligence methodology is custom-developed in response to the needs of the specific client and sector. However, we typically involve the following elements in designing the methodology:

  • Secondary Research: This is provided for by reviewing existing, published sources of information. For instance, a commercial due diligence in the automotive parts sector may require purchase of JD Power market forecasts for the automotive parc in the CIS.

  • Primary Research: This involves a series of structured interviews, factory or work observation, site visits or other primary research activities, i.e. those activities implemented by our consulting team.

  • Internal Research: This involves research within the company. Such research may include a sales analysis, value stream mapping, defect analysis, etc. This typically requires our access to core company data, such as sales or production statistics.

  • External Research: We try in each case to balance the internal viewpoint with the external one. This is obtained by customer and supplier interviews, vendor interviews or other insight derived from informed and qualified third parties.

  • Risk Analysis: This involves a detailed assessment of risks, which are typically described in terms of the likelihood of occurence, the trigger event, the magnitude of impact, and their measurable impact on the investment model.

  • Modelling: A core part of the due diligence study is the modelling process. This can include modelling of key sensitivities in a business plan, for instance, or development of a decision tree for mapping future investment decisions. This is a core part of our methodology, and we have developed some highly effective processes based on project experience.

Additional information on our due diligence resources and competencies are available upon request. Contact us for a free, confidential consultation, or request a quote for our due diligence consultancy services.