Case background
In 2022, a mid-sized private equity firm was considering a significant investment in a promising tech startup in Singapore. The startup boasted innovative technology and rapid growth, making it an attractive investment opportunity. However, before finalizing the deal, the private equity decided to conduct thorough pre-investment due diligence to assess potential risks and ensure the investment was sound.
Our approach
The private equity engaged us to evaluate the start-up’s reputation, intellectual property (IP) claims, and market position. The process included reviewing corporate records, interviewing key stakeholders, and assessing the competitive landscape. Additionally, our team examined the start-up’s IP portfolio to ensure the technology was proprietary and free from legal disputes.
Key Findings
During the due diligence process, several critical issues were uncovered:
- Financial Health: The firm’s detailed analysis revealed discrepancies in the start-up’s revenue projections. A significant portion of their projected income relied on a few clients who were not under long-term contracts, posing a risk to future revenue stability.
- Intellectual Property: The IP assessment found that one of the start-up’s core technologies was subject to a pending patent dispute. If the dispute was ruled against the company, it could potentially cripple their competitive advantage.
- Regulatory Compliance: We also discovered that the start-up was operating in a market with strict regulatory requirements, and they had not fully complied with these regulations. This posed a risk of legal penalties and operational disruptions.
Outcome
These findings gave our private equity client an edge on the negotiation table. This approach allowed our client to mitigate potential risks and strengthen the investment’s overall value proposition.
