Do you 'really' know who you are doing business with?

Due diligence or business intelligence, is critical in today’s business environment as the level of public scrutiny continues to grow. Increasingly the integrity of those at the helm of businesses, including beneficial owners and investors is becoming more important. Whilst key business processes and finances may warrant a deal progressing to finalisation, do you really know and understand who you are doing business with — and the potential issues that may arise down the track?

At PKF Integrity, business intelligence or due diligence is designed to provide clients with the necessary information to minimise the risks associated with a variety of commercial transactions; including mergers & acquisitions, the appointment of channel partners, procurement and/or pre-approval of contractors, the appointment of senior executives, and more.

There are known knowns, there are things we know we know. We also know there are unknowns; that is to say there are some things we do not know. But there are also unknown unknowns — the ones we don’t know we don’t know. Donald Rumsfeld, 2002

Recently, PKF Integrity was engaged to conduct due diligence enquiries into the backgrounds of four directors who were collectively investing US$10 million, through a joint venture agreement, into a client’s manufacturing plant. We were provided with a Mergers and Acquisitions due diligence report by a third party and there were no indications to suggest the deal should not go through. Our client was looking to grow and required funding. The four directors saw value in the proposition and were eager to invest.

On paper, everything looked positive; the directors were very successful business owners and investors, they had significant assets, positive cash flow, and low debt. More often than not, clients are happy to continue with a transaction on that basis. In this instance, though, there were red flags associated with all four directors. We looked beyond the traditional financial metrics and conducted background searches on all four directors including (but not limited to):

  • Social media
  • Adverse global media
  • Third party enquiries
  • Asset searches
  • Criminal checks
  • Civil litigation
  • Bankruptcy/insolvency
  • Regulatory review
  • Global compliance checks including major international online sanctions, enforcements and world-check proprietary suite of risk and compliance databases.

Among other findings, we discovered that:

  • One director had been indicted for corrupt behaviour of bribing a police officer and had been imprisoned
  • One director had a close relationship with one of the wealthiest individuals in China and this individual did not have a good reputation amongst his peers
  • One director was involved in a lawsuit in which they were a defendant to a contract dispute
  • One director was identified to be a politically exposed person as they were a current member of a powerful political party.

Our findings allowed our client to make an informed decision on the joint venture. In some instances, clients may walk away after discovering such red flags as the risk of reputational damage may outweigh the considered benefits to the company. However, in other instances, companies may be willing to take on the additional risk and use the findings to negotiate more favourable contractual agreements with the other party.

The business intelligence process is another method that can assist in minimising your organisation’s risk. In addition to fundamental financial, legal, and operational due diligence, it is imperative to conduct the fourth arm of due diligence, which is reputational or business intelligence. Having accurate and up-to date intelligence of this type should be a key component in the decision making process.

PKF have experience working with businesses of all sizes and types and can assist to ensure your policies and procedures are adequate to protect against these kinds of attacks. PKF can also assist to review technology and systems in place within your business to ensure they are fit for purpose, as secure as they can be and work with you to close any gaps identified.

Related insights

Subscribe to our newsletter


Propel your career

Learn more about Careers

Follow us

Find your closest office


Read our latest Clarity mag

View now

About the firm

Transparency reports