M&A Due Diligence Services 

Evershine provides Due Diligence (DD) services, including Financial Due Diligence (FDD) and Legal Due Diligence (LDD), which are led by CPAs in headquarter and performed by professionals in the target country, including 

Taipei, Xiamen, Beijing, Shanghai, Shenzhen, New York, California, Texas, Phoenix, Tokyo, Seoul, Hanoi, Ho Chi Minh, Bangkok, Singapore, Kuala Lumpur, Jakarta, Manila, Melbourne, Sydney, Australia, Bangladesh, New Delhi, Mumbai, India, Dubai, Frankfurt, Paris, London, Holland, Spain, Italy, Romania, Toronto, Mexico …etc… 

Email：tpe2ww.dd@evershinecpa.com 
Or 
Contact: Judy Wang Partner, CPA in Taiwan, MBA from Netherlands 
Cell Phone: +886-972-235-766  
Telephone: +886-2-2717-0515 ext. 100 
Email:judywang@evershinecpa.com 

For an M&A to be viable, the buyer’s discounted future IRR must exceed the seller’s EBITDA multiple. 
A thorough contingent liability risk assessment should include factors such as employee severance reserves, unresolved environmental or tax liabilities, and off-balance sheet risks like uncashed checks. 
The investee or acquiree, assuming consolidation, develops a financial model to maximize the bid while maintaining a pre-determined internal rate of return (IRR). 

M&A Due Diligence Services Q&A 

DD-ww-010 
The parent company in Taiwan wants to invest or merge and acquire companies in other overseas countries, what services can Evershine provide in which countries? 

A. 
Evershine affiliates are located in 50+ cities in 20+ countries and will be audited by colleagues from Evershine’s subsidiaries. 
In addition, as we are headquartered in Taiwan and have member firms in 141 countries, we are basically able to provide services in all of them, and we seldom come across Taiwanese businessmen proposing countries that are beyond the scope of our IAPA affiliate firms. 

DD-ww-020 
When Evershine receives a case, how do the Taiwan office and the IAPA overseas member firms carry out the checking of the project entrusted by our company? What is the division of labor? 

A. 
First, we imported the computer audit and transferred the relevant data files from the ERP used by the auditee to the Evershine cloud platform and the software used by the local auditors in each country. 
Then, at the Evershine headquarters, the computer checking program is prepared and sent to the checking site, saving time and reducing occurring expenses. 
Secondly, Evershine will assign a DD project manager plus an assistant to carry out project checking and planning for your company’s needs. 
IAPA partners are also invited to assign local accountants, local tax accountants, local attorneys, and local engineers with relevant industry expertise and their assistants, as needed, to perform local project audits, and each is asked to issue a report on the local perspectives of the project audits. 
Our DD project manager will write a report based on the local project audit report to meet your needs. 

DD-ww-030 
What is the difference between engaging Evershine plus a local accountant and directly engaging a local accountant?  

A. 
Project checking has special checking objectives, it is convenient to communicate in Taiwan and easy to understand your company’s thinking; Engage Evershine to look at things from your company’s point of view and execute the project from your position. 
In addition, there is no Conflicts of Interest concern. 
Many financial controllers say that they do not feel that overseas DD team is the same firms as they are assigned from different countries, Evershine and the IAPA firm, knowing that it is a Second-Tier firm, has been very united across countries and has been doing its best to provide services. 

DD-ww-040 
What is Evershine’s general procedure  in assisting with M&A audits? 

A. 
Evershine examines operating income for the past 2 years and for the operating year in which it is currently operating. 
At the same time, the most important thing is to check whether there is any risk of contingent liabilities in addition to the initial check on assets and liabilities. 
For example, how much would you have to pay if you assumed that all of your employees were retired? For example, are there any environmental cases, tax cases or other uncashed check risks that do not show up on the balance sheet? 
In addition, each asset will be revalued. 
Finally, we will calculate how much capital you will have to deploy to operate the business after you have purchased it.  
For example, if a foreign company buys a Taiwanese company, the original directors and supervisors must be released from the bank loan guarantee. 

DD-ww-050 
Has Evershine assisted in M&A in the past to check if the price offered by the acquired company is reasonable? 

A. 
Business Evaluation Methodology: 
(A) Cost Appraisal Method or Total Asset Valuation Method or Project Verification Method or Financial Information Agreement Process Method. 
External shareholders expect this method to be used, please refer to the following information for investors 

Due Diligence Service 
(B) The Income Appraisal Method or Adjusted Present Value Method, Discounted Cash Flow Method; this requires financial modeling for the next five years. 
The company usually expects to use the (B) method, please refer to Quintuple Growth Financial Modeling and Investment Planner 
(C) Market Appraisal. Reference values of past transactions in similar cases. Usually not available. 

Purpose of Business Evaluation and Evaluation Methods: 
(1) At the time of establishment or capital increase, the outside shareholders take up a small share after the capital increase. 
The company usually expects to use the (B) method, but outside shareholders expect to use the (A) method. 
(2) Outside merger and acquisition, in which the outside shareholders take up the majority of the shares after the purchase. 
The company usually expects to use method (B), but the outside shareholders expect to use method (A). 
(3) Outsiders buy the old shares, and after the purchase, outsiders take up the minority shares. 
The company usually expects to use method (B), but outside shareholders expect to use method (A). 
(4) For financial and tax reporting; usually under the (A) Act. 
(5) Litigation; usually (A) Act. 
(6) Bankruptcy; usually under the (A) Act. 
(7) In a corporate reorganization, two companies merge. 
The company usually expects the (B) method, but outside shareholders expect the (A) method. 
(8) Mortgages, usually by (A). 

To buy all or part of the equity of an overseas company, sometimes it is for the purpose of buying its resources, such as in the case of CPC Corporation, Taiwan, which entrusted us with the case. 
Sometimes it’s about buying a factory to manufacture products for sale overseas, sometimes it’s about buying technology and people to accelerate research and development, and sometimes it’s about buying a sales pipeline. 
For a M&A to work, the buyer’s discounted future IRR value is greater than the seller’s EBITA multiple. 
The value of the acquired company is mostly determined by the buyer, i.e. how your company performs after the acquisition. 
Usually, a financial model is prepared assuming a merger and a pre-determined IRR is used to generate the highest bid. 
The seller’s minimum base price is usually a simple EBITA multiplied by 6 plus the resulting net assets. 
Evershine can provide counseling services in this regard. 

DD-ww-060
What kind of project personnel are usually needed to conduct a complete audit of a large M&A project? What is the appropriate composition of the audit team?

A.
Mergers and acquisitions of large projects to check a complete DD team, there must be Taiwan accountants, Taiwan lawyers, local accountants, local tax lawyers, local contract lawyers, industry experts such as petroleum geotechnical engineers, land agents, appraisers of movable and immovable property, etc., large-scale international projects to check, and often the cost of services is tens of millions of Taiwan dollars.

DD-ww-070
I don’t think our case is that big, but how much does Evershine charge for smaller M&A projects?

A.
For small to medium sized M&A projects, usually Evershine is only responsible for a certain part of the project, only Taiwan accountants, local accountants, local tax lawyers, and the volume of the transaction is small, so the time spent is less.
For small to medium sized international M&A projects, the service fee range is around 1-1.5 million NTD.

DD-ww-080
What are some of the projects Evershine has worked on?

A.
The firm has worked on projects and assignments for which information is publicly available: **Unpublished information is not listed here **
1. Financial and Economic Feasibility Study for CPC Corporation, Taiwan – 5% Investment in Perth Prelude, Australia
2. Financial and Economic Feasibility Study for CPC Corporation, Taiwan – 5 % Upstream Investment Interest in RasGas II, Katha
3. Financial and Economic Feasibility Study for CPC Corporation, Taiwan – India Refinery Joint Venture.
4. Taiwan Sugar Corporation – Merger and acquisition of GS Orchard Commissioned Technology Services in California, USA.

DD-ww-090
Can you list the quotation of Financial Due Diligence (FDD) for our reference?

A.
**Will have Evershine Taipei qualified accountants, and with the local accounting firms, collaborative implementation. All of them are the responsibility of Senior Audit Manager and Senior Audit Staff.
**We will provide financial due diligence services for your investment targets.
The financial due diligence service will consist of the following three parts:

1. Financial statements and general information
2. Historical results of operations
3. Historical balance sheet

**Scope of due diligence
Primarily includes operating and financial information for the years 2021, 2022 and 2023 as of the date of the audit.

**Estimated working hours
We will charge within the estimated working hours stated in this document.
If the estimated working hours exceed the estimated working hours in this document, any increase in working hours will be subject to the prior written consent of your company.

**Estimated Charges
It is obtained by summing up the estimated number of hours spent according to the hourly rate of each professional rank. Here is an example for your reference:
The estimated service cost, in terms of man-hourly rate for our professional grades and the estimated number of man-hours to be spent are as follows:
Partner-in-Charge = $160 * (48 to 96 hours) = $7680 to $15360
Senior Consultant = $100 * (50 to 100 hours) = $5,000 to $10,000
Senior Audit Manager = $100 * (50 to 100 hours) = $5,000 to $10,000
Senior Audit Assistant = $60 * (90 to 1800 hours) = $5,400 to $10,800
Estimated Total Due Diligence Service Fee USD$ 23,080 to $46,160
The above fees do not include any additional services that may be required for any unusual projects, including any services that may be required to request disclosure or to communicate with regulators.
Any other services required will be billed at our professional grade hourly rate.
You will also be required to pay for travel and other out-of-pocket expenses such as report production, word processing, postage, etc.

**Payment Terms
An upfront retainer fee of $23,080 for due diligence services is required upon acceptance of employment.

DD-ww-100
Can you list the contents of LDD (Legal Due Diligence) for our reference?

A.
Legal project checking is also known as legal due diligence service.
**Legal due diligence focuses on contingent liability risk checking, including:

1. Staff salary reserve
2. Environmental or tax open cases.
3. Off-balance-sheet uncashed check risk.
4. Various contractual risks.

**For larger investments, tax lawyers are often required to join the due diligence team.

**We usually arrange for our Taiwan lawyers to instruct the foreign lawyers to perform and prepare legal opinions.

**The results of the legal due diligence will be used to adjust the results of the corporate valuation, including the EBITA of the FDD and the revaluation of Net-Assets.

**We perform legal due diligence based on inquiries, document review and professional judgment. However, we may not be aware of any deliberate concealment or withholding of information.

**Estimated working hours
We will charge within the estimated working hours stated in this document.
If the estimated working hours exceed the estimated working hours in this document, any increase in working hours will be subject to the prior written consent of your company.

DD-ww-110
Can you list out the work involved in financial modeling and preparing the investment plan for our reference?

A.
*For a M&A to be viable, the discounted future IRR (Internal Rate of Return) value from the buyer’s perspective is greater than the seller’s EBITA multiple or Net-Assets value.

**Through FDD financial due diligence and LDD legal due diligence, EBITA and Net-Assets can be obtained.

**IRR (Internal Rate of Return) discounting method requires financial modeling. Usually, the M&A party will create a financial model based on the assumptions of the merger and use the pre-determined IRR to generate the highest bid.

**Statement of cash flow for the next five years for the production of guidance
1.The unit prices, quantities, revenues and projected revenues for each type of goods or services for the current and next five years.
2.Production cost of goods sold
3.Manufacturing overhead costs
4.Producing future capital adjustment gap
5.Generate projected B/S and I/S.
6.Generate financial ratios such as IRR, ROA, ROI.

**We are relying on the data parameters provided by the auditee to aggregate the data, and we cannot guarantee whether all these forecasts can be accomplished in the future, so you have to make your own assessment.

**Obligations of the Appointing Party to Provide Information and Obligations of the Appointee to Maintain Confidentiality
1.The Appointing Party shall provide the Appointed Party with such detailed information as may be required by the Appointed Party up to the present time for the purpose of completing the cash flow statement for the next five years.
2.The Appointed Party is obliged to supervise its staff to maintain confidentiality and not to disclose the information obtained to third parties except with the Appointed Party’s written consent.
3.The Appointee is expected to complete the cash flow statement based on the information provided by the Appointing Authority and submit it to the Appointing Authority for confirmation within fifteen (15) days after the Execution Date.

**If the management team of the investee can provide financial modeling in Excel with Formula for us to review, it will reduce our working hours.

**Estimated working hours
1.We will charge within the estimated working hours stated in this document.
2.If the estimated working hours exceed the estimated working hours in this document, any increase in working hours will be subject to the prior written consent of your company.

DD-ww-120
Can you list the scope of work of Financial Due Diligence (FDD) for our reference?

A.
Usually, the checking program will be different for different countries, industries, sizes and customer’s concerns.
Below is a sample of our checking program for your reference.
We are pleased to confirm our understanding of the services we are to provide financial due diligence service for the audit of your targeting company in Targeting Country for the day ended 31 October 2023。
the financial and tax due diligence service will including:

**Financial Statements and General Information
1.Obtain monthly income statements and balance sheets for 2021 2022 and YTD 2023.
If required, analyze a schedule of the reconciling items from the total of the monthly financial results to the reported annual financial results.

2.Inquire of Management about the following matters as they relate to the historical periods:
(i) significant and/or unusual accounting policies;
(ii) changes in accounting policies;
(iii) the nature and extent of interim and year-end closing procedures;
(iv) unusual or non-recurring items of income and/or expense;
(v) transactions occurring that represent “soft” income (e.g., reversals of excess reserves); and,
(vi) accounts that involve a significant amount of management judgment, and assess impact of these matters on EBITDA.

3.Obtain a list of Management’s proposed adjustments to historical EBITDA, obtain appropriate documentation to support each adjustment and assess appropriateness of proposed pro forma adjustments.

4.Inquire of Management about related party transactions and affiliated party transactions including shared services or allocated costs, if any, and the basis for such shared services and allocations during the historical periods.

5.Obtain and analyze a schedule of inter-company balances as of and inter-company transactions during the historical periods.

6.Document a general understanding of and comment on appropriateness of the Company’s financial accounting systems and underlying internal controls and procedures.

**Historical Operating Results
1. Gain an understanding of and assess the appropriateness of the Company’s revenue recognition policy and other aspects of the Company’s sales policies such as sales terms, billing practices, credit memos, discounts, returns policies, and other allowances.
2. Obtain and analyze a comparative schedule of monthly revenue and gross margin by appropriate category and product for the historical periods.
3. Obtain copies of contracts with the ten largest customers and document terms and duration of contracts including pricing terms, renewal terms, commitments, and ability, if any, to cancel orders.
4. Obtain and analyze a schedule of sales and gross profit by customer/location/region for the historical periods.
Assess revenue and margin fluctuations and document reasons. e.g. new contracts, price changes, etc.
5. Obtain and analyze the components of cost of sales by category for the historical periods.
Identify unusual or non-recurring items affecting reported amounts.
6. Document and comment on the Company’s practices and methods used to accumulate fixed and variable costs and recognize cost of sales.
7. Obtain and analyze a comparative schedule of the components of operating expenses for the historical periods.
Identify unusual or non-recurring items affecting reported amounts. Inquire about monthly variances in the trend of operating expenses.
8. Prepare a proof of labor by agreeing payroll reports to payroll expense for 2022 and YTD 2023.
9. Obtain and analyze a comparative schedule of other income/expense for the historical periods.

**Historical Balance Sheets

Net-Assets will be generated as a reference for business evaluation.

*Cash
1. Obtain the Company’s bank account reconciliations as of the historical balance sheet dates. Inquire about any unusual items.

*Receivables
1. Obtain the contract and retention receivable aging reports as of the historical balance sheet dates, identify significant past due amounts, and inquire of management regarding the status and collect-ability of significant past due amounts. Consider historical write-off trends, aging and subsequent collections.
2. Obtain and comment on the sufficiency of the Company’s computation of the allowance for doubtful accounts (and other accounts receivable allowances) as of the historical balance sheet dates, if any.

*Inventory
1. Obtain and analyze a schedule of inventory by type as of the historical balance sheet dates and inquire about valuation.
2. Obtain and analyze a schedule of excess, slow-moving, or obsolete inventories, if any, as of historical balance sheet dates.

*Prepaid and Other Assets
1. Obtain and analyze a summary of the composition of prepaid and other assets at the historical balance sheet dates. Discuss the nature of and the accounting for these assets and variance from prior years.

*Property and Equipment
1. Obtain and analyze a list of property and equipment including accumulated depreciation and document the capitalization and depreciation policies.
2. Obtain and analyze a roll-forward of property and equipment, including additions, disposals, retirements and/or abandonment during the historical periods.

*Accounts Payable and Accrued Expenses
1. Inquire of Management as to accounts payable terms (e.g., payment terms, use of deposits or letters of credit), payment practices (e.g., extending terms or taking discounts), and cut-off policies, procedures and practices.

2. Obtain an (aged, if available) accounts payable trial balance as of the historical balance sheet date. Determine whether the trial balance has been reconciled to the general ledger and gain an understanding of significant or unusual reconciling items. Identify any significant past due balances and analyze in conjunction with non-operating liabilities.

3. Obtain a summary of the components of accrued liabilities and related supporting calculations as of the historical balance sheet dates.
Obtain an understanding of the nature of these accounts and the reasons for significant fluctuations in the account balances.
Inquire as to the existence of unrecorded or under (over) accrued liabilities and consider differences in year-end and interim accounting procedures on the accrued liabilities balance.
Comment on the likelihood of unrecorded or under-accrued liabilities or reserves.

*Debt
1. Inquire into the Company’s banking relationships including its outstanding indebtedness, borrowing terms and debt covenants, bonding requirements, and potential early repayment penalties.

*Commitments and Contingencies 
1. Obtain and analyze a summary of any asserted and unasserted claims and assessments, including but not limited to litigation matters, indemnification obligations, and regulatory investigations. 
Obtain a schedule summarizing any beneficial or adverse litigation settlements during the historical period and determine impact on reported EBITDA. 

2. Inquire as to the existence of any other significant commitments (such as leases, vendor contracts, purchase commitments, etc.) and contingencies and their impact on the proposed transaction. 
If applicable, obtain documentation to determine the potential future financial commitment of each. 

3. Obtain a listing of existing and future capital and operating lease commitments. 

*Working Capital 
1. Prepare a working capital trend analysis for the historical periods. Identify and comment on variances and fluctuations. 

**Taxes 
*Revenues and Expenses 
1. Obtain the details of the operating revenue and sampling the invoices. 
2. Obtain the details of the operating cost and expenses and sampling the invoices. 
3. Obtain the Value-added/Non-value-added Business Tax Form  and prepare the reconciliation statement for at least last two years. 
4. Obtain the business income tax filing and approval letter for at least last two years. 

Contact Us

Email：tpe2ww.dd@evershinecpa.com 
Or 
Contact: Judy Wang Partner, CPA in Taiwan, MBA from Netherlands 
Cell Phone: +886-972-235-766  
Telephone: +886-2-2717-0515 ext. 100 
Email:judywang@evershinecpa.com 

Additional information
Evershine has 100% affiliates in the following cities:
Headquarter, Taipei, , , ,
New York, San Francisco, Houston, Phoenix
Tokyo, Seoul, Hanoi, Ho Chi Minh, Bangkok,
Singapore, Kuala Lumpur, Manila, Dubai,
New Delhi, Mumbai, Dhaka, Jakarta,
Frankfurt, Paris, London, Amsterdam,
Milan, Barcelona, Bucharest,
Melbourne, Sydney, Toronto

Other cities with existent clients:
Miami, Atlanta, Oklahoma, Michigan, Seattle, Delaware;
Berlin, Stuttgart; Prague; Czech Republic; Bangalore; Surabaya;
Kaohsiung, Hong Kong, Shenzhen, Donguan, Guangzhou, Qingyuan, Yongkang, Hangzhou, Suzhou, Kunshan, Nanjing, Chongqing, Xuchang, Qingdao, Tianjin.

Evershine Potential Serviceable City (2 months preparatory period):
Evershine CPAs Firm is an IAPA member firm headquartered in London, with 300 member offices worldwide and approximately 10,000 employees.
Evershine CPAs Firm is a LEA member headquartered in Chicago, USA, it has 600 member offices worldwide and employs approximately 28,000 people.
Besides, Evershine is Taiwan local Partner of ADP Streamline ®.
(version: 2025/01)

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