Rigorously Evaluating Technology and Materials That Past Sales Don't Show
Although due diligence (work to quantitatively rate a company's worth) is a part of buyout talks, financial due diligence based on past financial statements and similar documents can only show actual business results. However, due to massive R&D investments to date, an increasing number of technology-based companies are emerging that choose the option of seeking dramatic growth as the subsidiary of a capital-rich firm by soliciting a buyout timed just prior to their market entry.
In this situation, however, the worth of companies with innovative technology is in many cases woefully undervalued when evaluated solely on the basis of past financial condition. The reason for this is that massive R&D expenditures are categorized financially as losses. As a result, technology-based firm managers rarely receive a truly satisfactory buyout offer. Ultimately, this pattern derails buyout talks, leaving superior technology to never see the light of day.
Rectifying this situation requires a third party with an eye for potential market value that can be referred to when evaluating whether a technology is truly superior in nature. This process is called business due diligence.
On the other hand, firms seeking to conduct buyouts run the risk of buying a company of little value if the original management team leaves it. A situation that invites a host of management and business problems. Determining whether a company has value and growth potential without its original management, or whether it is necessary to keep such managers one to continue business execution requires detailed and in-depth analysis.
Bluestar Corporation conducts business due diligence to evaluate companies with outstanding technology exclusively in the IT industry, and has acquired a reputation for this work within the M&A sector. Because both potential purchasers and buyout targets gain better assurance of future value, we invite both to take advantage of what our business due diligence has to offer.
Companies for Evaluation Under Business Due Diligence
- Software developers and providers
- Hardware engineers, developers and sales firms in the IT sector
- ASP and SaaS businesses
- Mobile solutions providers
- E-commerce providers
- Internet site operators
- R&D-based firms in the IT sector
- Other IT-sector firms
Sample Evaluation Items
- Effective applicable scope of patents and other rights (time that patent rights are granted, time when patent applications are under review)
- Future outlook of the technology application field (investigation of sales plan feasibility)
- Status of body of spec sheets and technology memos and difficulty level for third-party readers
- Determination of business risk in the event of technology representative departure
- Estimated market value that technology will trigger (monetary basis)
Implementation Examples
Company names and specific projects cannot be disclosed due to confidentiality agreements with all relevant parties. However, we have experience in performing business due diligence for buyouts conducted between publicly listed firms.
- Trading company IT division
- Purchase of heavy industries firm's IT division by US-based company
Price
Prices will vary depending on work required and budget.
