How companies can leverage data to support business due diligence
What is business due diligence?
Due diligence is the process of investigation, audit and verification that a company undertakes before, for example, investing in, merging with or contracting with another business. It’s a detailed, and potentially lengthy, process which gives a clear picture not only of the financial and legal position of a target business but also, if possible, its organisation, owners, management, their related networks – even its competitive landscape and supply chains.
What are the biggest due diligence challenges?
Due diligence is time consuming and resource-intensive, while traditional sources of data, like Companies House, have significant limitations. Searching for detailed information has, until now, been frustratingly difficult. Even specialist financial due diligence software has only been able to go so far in automating and speeding up company analysis. This is because the data has been limited, not always presented in a user-friendly way, generally incapable of carrying out a broad UK-wide company search or, for example, producing defined lists of potential targets. Click here to read how data and technology can be used to power deal origination.
How mnAI is used to enhance the business due diligence process
mnAI’s technology makes the due diligence process faster, more efficient and more informative. Our award-winning, cutting-edge AI technology means that aspects of the due diligence process which previously took weeks of manual research can now be undertaken and converted into easily accessible visual data within minutes. The mnAI platform is the UK’s largest and most comprehensive source of company data, with billions of data points (and 100m+ added every week) allowing real-time insights. AI technology delivers uniquely accessible insight and analysis across industries, sectors and geographies, making it a vital due diligence tool.
The 6 stages of business due diligence and how mnAI can make it a faster and more accurate process.
1. Develop a strategy and due diligence checklist
This involves a company or investor having a clear understanding of what they are looking for from a particular business – perhaps gaining access to new markets and customers, expanding product ranges or services, or absorbing the competition.
mnAI’s data analysis can help companies define and refine their strategy by enabling detailed, focused research into companies in particular sectors. Companies are categorised in a much more defined way than the standard SIC codes used by Companies House allow, so searching for targets within a particular industry can be done with greater accuracy and speed.
2. Set the criteria for identifying target companies
Once the business purpose of the search has been defined, the next step is to set the criteria for target companies. This may include location, sales growth, profit margin, customer base, age of directors – or several other of the 350+ search variables available on the mnAI platform.
3. Search for potential acquisition targets
Once the strategy and criteria are established, the task of searching for potential targets begins. The first step is to build a longlist, which is then analysed and refined to identify which companies are interesting enough to make the shortlist. This is a part of the process which, until now, has been particularly time-consuming.
By further refining the 350+ search variables, mnAI can significantly reduce the time it takes to research companies by narrowing down the list of potential targets. Using mnAI, organisations within Private Equity or Corporate Finance can rapidly discover millions of UK companies in early, growth and late stage phases and create a list of potential investment/acquisitions targets in a fraction of the time previously required. mnAI can then rapidly deliver further meaningful insight and analysis, in a user-friendly dashboard, on the target company , its competition and even its supply chain.
4. Begin the process of making contact
With the shortlist completed, the process of making contact with target companies begins, to assess the company owners’ interest in a deal and establish an understanding of their valuation or contract expectations. Establishing who owns a particular company (and then accessing their contact details) can be surprisingly complicated. mnAI’s network tool makes it much simpler to identify who to contact within a target organisation. Our network analysis technology has been designed to quickly visualise networks of companies, directors and shareholders – and their connections.
5. Valuation analysis
If the initial contact and conversations go well, the next step is to ask the target company to provide further information (up-to-date financials, projections etc.) that will enable you to further assess its suitability.To arrive at an initial valuation, you’ll need to look at it from both a financial and an operational standpoint. With the information already gleaned from mnAI you will already have a significant depth of knowledge and therefore be able to ask the right questions.
Once your valuation analysis is completed you should have enough information to make a reasonable first offer which, almost inevitably, will lead to a negotiation. The intelligence that you have already gathered about the company from mnAI should put you in a stronger position at this stage while you can continue to use the platform to further investigate aspects of the business as required. The source of the most comprehensive UK company data, mnAI’s uniquely accessible insight and analysis across industries, sectors and geographies is a vital intelligence and analysis tool for investors and companies, allowing them to quickly identify and research potential targets, and add depth and value to the due diligence process.
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