When undergoing an M&A, assessing the risks of the subsidiary is necessary. However, only the Big 4 firms seem capable of such assessments.
It’s rumored to become exceedingly expensive, leading to cases of abandonment. Hence, I’d like to introduce the services of Probitas Tax.
(1) What is Due Diligence(“DD”)
Here is common Due Diligence (“DD”) services areas. These DD processes are carried out using the services of specialists or consultants specialized in specific business or risk areas.
- Financial DD: Evaluates accounting information, financial status, taxation, contracts, etc., presenting financial risks and opportunities to the acquiring company. Audit firms or consultants conduct these assessments.
- Tax DD：Evaluates tax returns and relative documents, etc., presenting tax risks and opportunities to the acquiring company. Accounting firm or consultants conduct these assessments.
- Legal DD: Evaluates legal risks, contract terms, litigation risks, intellectual property, etc., and is conducted by legal consultants specializing in this field.
- Industry/Market DD: Conducts market research, including analyzing industry trends, market positioning, competitor analysis, etc. Industry experts or consultants are involved in this process.
- HR/Labor DD: Assesses employee contracts, employment conditions, HR risks, organizational culture, etc., handled by HR consultants.
- Technology/IT DD:Evaluates IT infrastructure, system security, technical debts, etc., and isinvestigated by specialists or technical consultants.
(2) Handling ofJapanese Subsidiaries/Branches in the Case of M&A between Overseas Parent Companies
When overseas parentcompany outside Japan engages in M&A, Japanese subsidiaries also become involvedin the M&A process. In such cases, due diligence on Japanese subsidiaries is necessary.
It’s crucial to gather detailed information about the Japanesesubsidiary with the cooperation of these experts and service providers whenoverseas entities engage in M&A to minimize risks.
However, due to few accounting firms capable of preparing and presenting DD reports in English, it’s often heard that Japanese subsidiary/branch becomes out of scope of DD, despite recognizing the necessity of due diligence for Japanese subsidiaries.
(3) Introduction to Probitas Tax Corporation’s Due Diligence Services for Foreign-Owned Japanese
Subsidiaries
Probitas Tax Corporation can prepare Due Diligence reports in English in the following
fields:
- Financial Due Diligence
- Tax Due Diligence
- Legal Due Diligence
- HR/Labor Due Diligence
We can offer simplified reports starting from ¥1,000,000. If you are interested, please feel free to contact us. We would be happy to provide you with a quotation.
(4)When a Japanese parent company engages in an M&A and the target company owns overseas subsidiaries, there might be a request to conduct due diligence on those foreign subsidiaries.
Probitas Tax is a member of BOKS international, comprising over 100 accounting and law firms worldwide.
We can facilitate introductions to local accounting and law firms for conducting due diligence on overseas subsidiaries. Furthermore, we provide DD reports in Japanese.
https://probitas.jp/en/kokusaizeimu/boks-international/
If you’re seeking accounting or law firms abroad, feel free to consult with us without hesitation.
