Due Diligence

Due Diligence

HEFFX's focus on the sectors that we serve makes us uniquely qualified to assist in executing commercial due diligence in support of M&A activities. Our multi-disciplined team members work seamlessly with legal and accounting due diligence professionals to provide a comprehensive review of target markets and companies. Through the due diligence process, we not only characterize the target market and company’s position, but also develop key deal points for use in the acquisition negotiation process and outline key steps to be taken immediately post-acquisition to maximize value. Our general process investigates key commercial aspects of the target company, including the following:

Strategic drivers, including:

• Market analysis
• Competitive positioning, including threats and challenges to the company's products and services
• Key differentiators and structural barriers to market share erosion
• Assessment of key management, including management contracts

Revenue drivers, including:

• Assess market dynamics
• Identify key growth drivers
• Estimate growth rates
• Identify and estimate revenue improvement potential; formation of post-M&A improvement plan
• Review key revenue drivers and forecast assumptions (e.g., for airlines yields, load factors and fair shares are validated)
• Analyze customer concentration
• Review largest customer contracts and agreements
• Analysis of partnership or JV relationships, if any

Cost drivers, including:

• Review of cost structure and profitability
• Identification and estimation of cost saving potential; formation of post-M&A improvement plan
• Review of 3rd party purchased capacity (e.g., Interline agreements)
• Assessment of maintenance cost exposure
• Review of lease structures
• Personnel and employee cost assessment including deferred compensation
• Review of outside contractors and supplier arrangements
• Detailed review of SG&A
• Review of schedule of taxes
• Assessment of intercompany agreements

Balance sheet drivers, including:

• Assessment of asset (e.g., Aircraft, spares, facilities) condition and maintenance cycles
• Review of debt instruments / bank lines with key terms and conditions
• Review of off-balance sheet liabilities
• Asset liquidity testing / receivable aging schedule
• Assessment of options, warrants and rights
• Review of financing history for equity and debt and implied valuations
• Assessment of capital expenditures, depreciation and working capital arrangements
• Review of external financing arrangements

Financial forecast assessment, including:

• Testing financial projections and economic assumptions underlying those projections
• Cost structure and profitability
• Backlog and capacity assumptions
• Analyzing major growth drivers
• Predictability and risks of business operations
• Industry and company pricing policies
• Taxes including net operating loss carry forwards
• Analyzing and stress-testing company-provided income statement, balance sheet and cash flow projections