Financial Due Diligence

The aim of a Due Diligence is to provide an objective view of the enterprise’s business status and to determine its real value and possible risks for the main purpose to determine investment attractiveness for a possible acquisition.

A legal and financial analysis, estimation of potential risks in assets or its partial loss, evaluation of the assets’ fair value, determination of the market value by means of assets’ estimation, all these are being conducted in the framework of a complex examination of enterprise’s activity.

Analysis’ results are provided in the form of a conclusion in the following sectors:

• Financial aspects;

• Legal aspects;

• Risks management;

• Market value of an enterprise.

Financial aspects include:

а) Financial analysis:

• Balance analysis;

• Profit and loss statement analysis;

• Liquidity and business solvency analysis;

• Index analysis of business activity;

• Debt instruments analysis, its estimation as to a fair value;

• Determination of liabilities and assets fair value;

• Determination of profit participation rights in the view of assets and liabilities fair value;

• Estimation of enterprise’s market value based on assets estimation.

b) Debts and liabilities:

• Providing a list of basic loans sources, including loans value, interest rate and payments information;

• Providing a loan repayment plan indicating a sum of existing enterprise’s debt, which should be paid on the moment of enterprise’s sale, including information on leasing if any;

• Tax payments comparison for a three-year period and estimation of tax compliance;

• Identifying parts of assets, which are leased or used as covering;

• Payables and receivables analysis, its estimation as a fair value.

Legal aspects include:

a) Due Diligence on corporate law:

• Data identification about enterprise’s founding, its shareholders, administration, affiliates, its executive and controlling offices;

• Data identification about capital stock of an enterprise;

• Identifying legal risks in relation to formation of an authorized capital, law violation at securities issuance;

• Identifying legal risks in relation to shareholder’s rights violation, share or equity encumbrance, as well as omission to observe the order of decisions on dividends payouts;

• Identifying legal risks in relation to illegal decision on equity carve-out (its parts) which belong to an enterprise.

b) Due diligence of the deals, including those connected with equities (or its parts) encumbrance or carve-outs, lodged to an enterprise:

• Due diligence of the risk group deals;

• Identifying legal risks in relation to land ownership;

• Determination of data on deals, influencing the interest rate and the right on its ownership;

• Identifying legal risks in relation to equity encumbrance (partially);

• Identifying the facts of law violation at the closing of a deal on equity (partially), belonging to third parties.

c) Legal risks based on litigation and claims:

• Identifying the claims and law suits against an enterprise.

d) Legal risks and legal relations of an enterprise with supervisory, controlling, licensing and antitrust authorities, as well as with governmental and administration authorities:

• Establishment of cases on rendering penal and orders against an enterprise by supervisory, controlling, licensing and antitrust authorities;

• Establishment of the rights on land utilization;

• Establishment of the legal risks in relation to enterprise’s operations without any license or in regard to violation of terms of a licensing contract.

Risk management includes:

• Risk valuation of ROI;

• Risk valuation on all discovered determinations.

Market value of an enterprise is being determined by means of subcontract with valuers.