Specifics of Due Diligence procedure in mergers and acquisitions in the Russian Federation

Abstract

Aim. To study the elements and main features of the Due Diligence procedure, including mandatory and additional stages of due diligence of Russian companies, as well as taking into account the peculiarities of the Russian legislation and regulatory bodies.Objectives. To perform an in-depth theoretical analysis of the main tasks of the Due Diligence procedure in M&A of enterprises; to develop proposals for improving the methodology of the Due Diligence procedure in the Russian Federation (RF).Methods. The authors used general scientific research methods, including data collection and processing, content analysis, generalization, systematization, analysis of legislation and legal practice in the field of mergers and acquisitions, as well as the experience of Russian enterprises in conducting the Due Diligence procedure.Results. The Due Diligence procedure is an important stage of corporate transactions in the M&A process in Russia. The article shows that one of the key features is the necessity to take into account specific legal and tax aspects of the Russian legislation when conducting due diligence. It is necessary to take into account not only the risks, but also the influence of state regulators and regulatory bodies on the results of the transaction. Based on the results of the analysis and systematization of the information obtained, general methods and recommendations in the course of the Due Diligence procedure were determined. The statistical data on M&A transactions in Russia are considered, the attention is emphasized on the importance of Due Diligence at the rapid growth of M&A transactions. It is proved that the Due Diligence procedure increases the transparency of Russian companies and contributes to the improvement of the investment climate in the country.Conclusions. The study of the peculiarities of Due Diligence in M&A in Russia allows us to focus on the importance of legal analysis, financial and economic evaluation, as well as personnel and corporate culture assessment. Legal analysis provides an opportunity to identify and assess legal risks and problems related to the company's operations. Financial and economic analysis and audit help to identify and assess financial risks and problems, current and potential. Personnel and corporate culture assessment helps to understand how well they are aligned with the business objectives and strategy of the transaction. All three areas of assessment must comply with the requirements of domestic legislation and take into account the specifics of the labor market in Russia. A proper Due Diligence assessment of all three areas will help to detect possible risks and problems related to legal, financial and personal aspects of the company's activities, as well as provide a reliable basis for making correct and informed decisions regarding the M&A transaction.