Due diligence important for foreign investment
Pre-transactional due diligence and seller diligence are key to the influx of foreign investment, according to a risk solutions firm.
Kroll said the China-Australia Free Trade Agreement (ChAFTA) had opened the floodgates to increased Chinese investment and due diligence conducted on a potential buyer has become even more relevant.
The firm said China has overtaken the US as Australia's top foreign investor at US$19.7 billion ($28.1 billion) in 2014, up 75 per cent from the year before. The US totalled US$12.5 billion in approved proposals in 2014, down from US$14.7 billion in 2013.
Australian business community there is a sense of not knowing who one is dealing with when greeted with potential investment proposals from foreign investors, it said.
Commenting, Kroll managing director, Richard Dailly, said pre-transactional due diligence is not the prerogative of the buyer, but should be conducted on both sides.
"[It is] vital to achieving an alignment of interest between the different parties, enabling each side to become more aware of who they are really dealing with and to make astute, better-informed decisions in the interests of a sustainable, risk-managed transaction and relationship," he said.
Kroll's senior managing director, Violet Ho, said seller diligence on the acquirer is an indispensable stage of deal-making itself.
"[It is] an invaluable window of opportunity for the sell-side to verify and validate what it considers attractive in the potential deal, such as the financial standing of the buyer, certain clauses in the contract, or the ability of the buyer to pay the consideration," she said.
ChAFTA has raised the screening threshold for private Chinese investment in non-sensitive sectors from $252 million to $1.09 billion.
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
