velohead66

Can someone tell me exactly what a LoC is,
Does it have any *legal* standing.

Also Can someone tell me exactly what Due Dilligence means,
in the context of a [large -either listed/non listed] company being sold.

Ta.

ChrisB

DD to me means doing your homework to check all is healthy and above board before you engage in a financial transaction, like buying another company.

velohead66

From what I've been seeing/reading/hearing, it's more on the side of the seller, rather then the buyer.

As always, let the buyer beware.

Maybe there is a *obligation* for the seller to do something ??

ChrisB

Fair enough. I thought the buyer performed DD to ensure it's not buying a pup, but then I work in IT

Diablo or somebody should know.

None Prouder

ChrisB is right. DD is done by the buyer, it's the equivalent of looking at the car/paperwork etc before you buy it. Generally more DD is done on a non-listed acquisition than on a listed company. It can be a huge exercise (and money spinner) for the lawyers (worth every penny) and accountants.

Letters of Credit can take many forms (I sound like Gandalf) but usually it amounts to comfort from a Bank that the company has the cash in question.

None Prouder

Diablo

Hi,

Due dilligence is simply the act of verifiying the information avaiable to you when undertaking a transaction.

Can be anything from running a credit check on a new customer to a full examination and check of a companies assets and liabilities, etc.

Most common use of detailed (read expensive) due dilligence is by financiers when considering lending or in relation to company mergers, sales and aquisitions in which case there will be dilligence undertaken by the buyer to establish exactly what is being bought and also the seller, to establish if the buyer is good for the value.

Bear in mind that many corporate deals of this type are not done for cash only, but an equity stake in the purchasing company so it is important to make sure of the value that equity has - hence dilligence done on both sides.

This is a very simple overview.

Letters of credit are, effectively, a guarentee provided by a financier to protect exporters.

Did a quick search and found this clear explanation of how it works :

http://www.credit-to-cash.com/export...f_credit.shtml

Hope this helps

D

Butty

iTrader: (2)

DD is not limited to financial health of a company.
Purchase of a property and its operations will attract a DD environmental audit. This audit investigates and assesses that past and present operations have not resulted in an environmetal impact that the propective purchaser will be liable for remedy.

Nick

velohead66

Thanks Guys, clears it up nicely, Ta.