Corporate restructuring is an action taken by a corporate entity to significantly modify its capital structure or operations. This has been further elaborated in our article on What is Corporate Restructuring and the Role of the Board in Ghana authored by our Senior Associate of VINT and Aletheia, Attorneys and Consultants.
In Ghana, corporate restructuring, such as mergers, acquisitions, and divestitures, is essential in shaping the business environment. However, these transactions carry inherent risks and complexities, making thorough due diligence necessary. Due diligence helps assess these risks, validate financial and operational conditions, and ensure compliance with legal and regulatory frameworks.
This article explores the primary objective of due diligence in corporate restructuring in Ghana.
What Is Due Diligence?
Due diligence in corporate restructuring means verifying, investigating, or auditing a potential deal or investment opportunity. This is essential for confirming all relevant facts and financial information, as well as validating any other claims that arise during a corporate restructuring or investment process.
The primary objectives of due diligence, as it pertains to a company subjected to corporate restructuring, include:
- Identifying potential risks and prospects;
- Assessing liabilities and obligations of the target company to be restructured;
- Evaluating legal and regulatory compliance to be completed;
- Verifying the accuracy of financial records provided by the company; and
- Understanding the cultural and organizational alignment of the target company.
Due diligence is performed before a deal is finalized to provide certainty on the value of a company. By conducting a comprehensive risk assessment, companies can develop strategies to mitigate or eliminate identified risks before completing the transaction. It is therefore conducted in some cases by the target company to be restructured as a check-measure on themselves to make informed decisions on an investment deal, and for an investor, to identify any potential liabilities and assets they will inherit.
Why Does Due Diligence Matter?
Conducting due diligence helps identify and evaluate potential risks associated with the target company. These risks may involve financial liabilities, legal disputes, regulatory non-compliance, and operational inefficiencies. Through a thorough risk assessment, companies can develop strategies to mitigate or eliminate these risks before finalizing the transaction.
