Background A prominent company in the information technology and telecom services domain engaged our firm to conduct due diligence for a potential acquisition of a Canada-based startup. The client’s primary requirement was a detailed review encompassing financial and legal due diligence to assess the target company comprehensively.

Scope of Work We divided the engagement into two main components:

1. Legal Due Diligence:
   • Analyzed business contracts to identify potential risks and irregularities.
   • Examined legal notices and statutory compliance records.
   • Verified adherence to Canadian regulatory frameworks and international standards.
   • Evaluated existing litigations and their potential financial and operational implications.
2. Financial Due Diligence:
   • Conducted a detailed audit of books of accounts, focusing on division-wise and geography-wise performance.
   • Addressed typical startup challenges, such as incomplete accounting and suboptimal bookkeeping.
   • Identified discrepancies to provide the client with a realistic view of the target’s turnover and profit.

Execution Our specialized team of Chartered Accountants and legal experts ensured a meticulous approach:

• Legal Checks: Cross-referenced contractual obligations with actual practices to identify gaps. Ensured no unforeseen liabilities could arise post-acquisition.
• Financial Audit: Employed a risk-based audit approach, leveraging the latest internal audit standards, to ensure all critical areas were reviewed. Key areas included financial records, operational expenses, and tax compliance.

Challenges and Resolutions

• Incomplete Records: Collaborated closely with the target company to reconstruct missing data and ensure accuracy.
• Regulatory Variations: Leveraged our expertise in cross-border compliance to mitigate legal risks in the Canadian market.

Outcome The due diligence provided the client with a transparent and detailed understanding of the target company’s financial health and legal standing. This enabled informed decision-making, ensuring alignment with strategic goals and risk appetite.

Lessons and Value Delivered

• Tailored Expertise: Our ability to customize solutions based on industry and geographical specifics was instrumental in achieving desired results.
• Comprehensive Insights: By addressing both financial and legal dimensions, the client was well-equipped to finalize the acquisition without surprises.

This engagement exemplifies the importance of robust due diligence in mergers and acquisitions, particularly for startups operating in regulated and dynamic industries.