What is the due diligence process for M&A in India?

The due diligence process for M&A in India is a comprehensive and critical evaluation designed to uncover potential risks and opportunities before finalizing a transaction. The process generally involves several key steps, each contributing to a thorough understanding of the target company.

• Financial Due Diligence: This involves scrutinizing the target company’s financial statements, including balance sheets, income statements and cash flow statements. The aim is to assess the accuracy of financial reporting, evaluate working capital requirements, and understand the company’s financial health and historical performance trends​.
• Legal Due Diligence: This step includes reviewing corporate governance documents, material contracts, litigation history, compliance with regulatory requirements, and intellectual property rights. Ensuring the target company’s legal standing helps mitigate risks related to legal disputes and compliance issues​​.
• Operational Due Diligence: This aspect focuses on the company’s operational processes, including supply chain, manufacturing and distribution.
• Commercial Due Diligence: This step assesses market positioning, customer relationships, sales strategies and competitive landscape​​.
• Tax Due Diligence: Reviewing past tax filings and compliance with tax laws is crucial to identify any tax liabilities or exposures. This step also includes evaluating the implications of tax planning strategies on the transaction​.

The due diligence process typically involves the collaboration of various experts, including financial advisors, accountants and corporate lawyers in India. Engaging a corporate lawyer in India is essential to navigate the legal intricacies and ensure all aspects of the transaction comply with local laws and regulations​.