If you’re planning to acquire a business in France, limiting risks is key. An acquisition audit (or due diligence) helps verify the seller’s info and ensures the sale price isn’t overestimated. Depending on the project, company size, and industry, various audits may be needed, such as accounting, tax, corporate, legal, contractual, organizational, etc. audits.
Why is an acquisition audit crucial in France?
An acquisition audit diagnoses the business, identifies strengths and weaknesses, and informs negotiation strategy. If weaknesses are found, solutions can be discussed, like asset guarantees, bank guarantees, earn-out clauses, etc. Negotiations should be conducted diplomatically, as excessive demands can bring negotiations to a halt. The goal is to establish a negotiation basis and justify price adjustments. This process helps buyers make informed decisions and avoid costly surprises down the line.
For more information on how to navigate business and commercial issues in France, check out our page on business and commercial issues.
An acquisition audit is a crucial step in any business acquisition, allowing buyers to identify potential risks and negotiate a fair deal. — Marc Timmermans, Partner, Tax/Corporate
Diagnosis vs. audit: what's the real difference?
A diagnosis gathers info to decide on the takeover. An acquisition audit verifies this info through expert analysis, providing a more in-depth understanding of the business’s financial, legal, and operational situation.
Due diligence is not just about identifying risks. It’s about understanding the opportunities and challenges facing the target company. — Marc Timmermans, Partner, Tax/Corporate
What does an acquisition audit cover in France?
The audit scope depends on the project type (business or shares acquisition).
- The purchase of a business consists of acquiring a set of intangible and tangible assets intended for the operation of a business. The buyer doesn’t take over the company’s debts and receivables. In this case, the analysis focuses mainly on the company’s sales and contracts.
- Buying a company involves acquiring the company’s assets and liabilities. In this case, an in-depth analysis of the company as a whole is required, and various audits can be carried out, such as accounting and financial, tax, legal, social, and organizational audits.
You can find more information on the legal aspects of business acquisitions on the French Ministry of Economy and Finance website.
The key to a successful acquisition audit is to focus on the key areas of risk, such as tax liabilities, employment contracts, and regulatory compliance. — Marc Timmermans, Partner, Tax/Corporate
How to organize an acquisition audit in France?
Ideally, the audit happens after signing a letter of intent but before finalizing the deal. Costs depend on the audits needed and expert fees, usually borne by the buyer. An engagement letter must be drawn up to define the purpose of the assignment, scope of work, duration, information to be provided by the vendor, auditors’ fees, etc. A report summarizes findings, highlighting strengths, weaknesses, and solutions. Key steps include:
- Defining the audit scope and objectives
- Selecting the right experts (lawyers, accountants, etc.)
- Conducting the audit and analyzing results
- Negotiating the deal based on findings
If you’re planning to set up a company in France, our team can help with company setting-up. Our services also include tax assistance (individuals and corporate) and debt recovery if needed.
In France, a thorough acquisition audit can help buyers navigate complex tax and regulatory environments, ensuring compliance and minimizing surprises. — Marc Timmermans, Partner, Tax/Corporate
Expert help for your acquisition audit in France
Specialized lawyers, like those at My French Lawyer, are well-placed to provide expert audit services. Our registered lawyers are at your disposal to assist with a comprehensive audit, whether you’re buying or selling a business. We’ll match you with the best lawyers to handle your needs and provide tailored advice. Contact us today to discuss your project and get started.