The main types of due diligence assessment JFS Consultancy and Law Firm undertakes are:-

1.   Financial DD

2.   Asset DD

3.   Legal DD

4.   Administrative DD

5.   Strategic

6.   Environmental DD

7.   Tax DD

8.   Human Resources DD

1. Financial DD

One of the most important types of due diligence is the financial due diligence which seeks to check whether the financials showcased in the Confidentiality Information Memorandum (CIM) are accurate or not. Financial DD aims to provide a thorough understanding of all the company’s financials, including, but not restricted to, audited financial statements for the last three years, recent unaudited financial statements with comparable statements of the last year, the company’s projections and basis of such projections, capital expenditure plan, schedule of inventory, debtors and creditors, etc.

The financial due diligence process also involves analysis of major customer accounts, fixed and variable cost analysis, analysis of profit margins, and examination of internal control procedures. Financial DD additionally examines the company’s order book and sales pipeline, in order to create better (more accurate) projections.

Many acquirers have a separate section of financial analysis focused on the target company’s debt situation, evaluating both short-term and long-term debt, applicable interest rates, the company’s ability to service its outstanding debt and to secure more financing if needed, along with an overall examination and evaluation of the company’s capital structure.

Clinton Consultancy is regularly instructed to carry our Financial DD’s throughout Africa.

2. Asset DD

Another of the types of due diligence conducted is asset DD. Asset due diligence reports typically include a detailed schedule of fixed assets and their locations (if possible physical verification should also be done), all lease agreements for equipment, a schedule of sales and purchases of major capital equipment during the last three to five years, real estate deeds, mortgages, title policies, and use permits.

3. Legal DD

Legal due diligence is, of course, extremely important and typically includes examination and review of the following elements:

·       Copy of Memorandum and Articles of Association

·       Minutes of Board Meetings for the last three years

·       Minutes of all meetings or actions of shareholders for the last three years

·       Copy of share certificates issued to Key Management Personnel

·       Copy of all guarantees to which the company is a party

·       All material contracts, including any joint venture or partnership agreements; limited liability company or operating agreements

·       Licensing or franchise agreements

·       Copies of all loan agreements, bank financing agreements, and lines of credit to which company is a party

4. Administrative DD

Administrative DD is the aspect of due diligence that involves verifying admin-related items such as facilities, occupancy rate, number of workstations, etc. The idea of doing due diligence is to verify the various facilities owned or occupied by the seller and determine whether all operational costs are captured in the financials or not. Admin DD also gives a better picture of the kind of cost the buyer is likely to incur in case they plan to pursue expansion of the target company.

5. Strategic Fit

Acquirers are generally also very careful about exercising due diligence in regard to evaluating how well the target company fits in with the overall strategic business plan of the buyer. For example, a private equity firm considering a new acquisition will ask how well the proposed target will complement the firm’s existing portfolio of companies. A large corporation eyeing a possible M&A deal considers how easy (or how difficult) it is likely to be to successfully merge the target company into the buyer’s total corporate organization.

Following are some of the key strategic fit issues that we  look at and evaluate:

·       Does the target have important technology, products, or market access that the acquirer lacks and has need of or can make profitable use of?

·       Does the target have key personnel that represent a substantial gain in human resources?

·       Assess operational and financial synergies benefits that can be expected from the target’s integration with the acquirer

·       If the target company is to be merged with the acquirer or another firm the acquirer already owns, examine the plan for merging and project how long the merger process will take and estimate the cost of implementing the actual process of merging the two firms

·       Determine the best personnel from both the acquirer and the target to manage the merger process

6. Environmental DD

Diligence related to environmental regulation is very important because if the company violates any major rule, local authorities can exercise their right to penalize the company, up to and including shutting it down operationally. Hence, this makes environmental audits for each property owned or leased by the company one of the key types of due diligence. The following are reviewed by us carefully:

·       List of environmental permits and licenses and validation of the same

·       Copies of all correspondence and notices with the EPA, and state or local regulatory agencies

·       Verify that the company’s disposal methods are in sync with current regulations and guidelines

·       Check to see whether there are any contingent environmental liabilities or continuing indemnification obligations.

7. Taxes DD

Due diligence in regard to tax liability includes a review of all taxes the company is required to pay and ensuring their proper calculation with no intention of under-reporting of taxes. Additionally, verify the status of any tax-related case pending with the tax authorities.

Documentation of tax compliance and potential issues typically includes verification and review of the following:

·       Copies of all tax returns – including income tax, withholding, and sales tax – for the past three to five years

·       Information relating to any past or pending tax audits of the company

·       Documentation related to NOL (net operating loss) or any unused credit carry forwards of deductions or tax credits

·       Any important, out-of-the-ordinary correspondence with tax agencies

 8. Human Resources DD

Human resources due diligence is extensive. It may include all of the following:

·       Analysis of total employees, including current positions, vacancies, due for retirement, and serving notice period

·       Analysis of current salaries, bonuses paid during the last three years, and years of service

·       All employment contracts with nondisclosure, non-solicitation, and non-competition agreements between the company and its employees. In case there are a few irregularities regarding the general contracts, any questions or issues need to be clarified.

·       HR policies regarding annual leave, sick leave, and other forms of leave are reviewed.

·       Analysis of employee problems, such as alleged wrongful termination, harassment, discrimination, and any legal cases pending with current or former employees

·       Potential financial impact of any current labor disputes, requests for arbitration, or grievance procedures pending

We regularly advise Individuals, Global Multinationals, Fortune 500 companies and Foreign Governments and their agencies.

Our commercial and complex litigation expertise allows us  to handle every variety of commercial litigation from a simple contract dispute for the small business owner to the largest complex litigation for corporate clients. One of our most recent cases involved the United States Football Association, protecting its company law rights at the High Court and Supreme Court in United States whilst negotiating for the company with FIFA in Zurich.

The areas in which we advise include:-

• Commercial disputes
• Administrative and constitutional matters
• Environmental liabilities
• Disputes relating to corporate governance, shareholder rights, etc.
• Corporate securities and financing
• Construction and engineering
• Class actions
• Creditors’ remedies and collections
• Insolvency and realization
• Competition and anti-trust issues
• Forestry, mining, oil and gas and other natural resources issues
• Professional regulation
• Pension issues
• Taxation
• Real property and land use disputes
• Intellectual property and high technology issues (including copyright, trademark, patent and industrial design-related matters)

We have facilitated several billion dollars in investment projects and capital flows across the continent and have recently started making our own direct investments in African companies.

Clinton Consultancy’s success derives from our deep understanding of how to get things done in Africa.  Our knowledge, and that of our proprietary network, is rooted in decades of experience and has proven uniquely valuable to a diverse range of clients and strategic partners.   Our track record designing and executing customized, compliant “ground-games” across the Continent is the reason global brands and boutique investors have chosen and trusted Clinton Consultancy.

Our total solution consulting includes:-

• Strategic Counsel
• Project Facilitation
• Regulatory Navigation
• Government Affairs and Corporate Communications
• Opportunity Identification And Vetting
• Introductions To Key Interlocutors To Make Deals Real
• People And Institution Mapping
• Identification
• Crisis Management And Negotiations
• Development Of Sustainability Initiatives

Infrastructure Development

JFS Consultancy’s infrastructure development initiative mobilizes and assists as a strategic partner, operator and developer to expand Africa’s infrastructure, from airports, maritime facilities and rail lines, to power, and ICT networks. Clinton Consultancy executes this initiative through a consortium of global developers. We currently have USD $3 billion in projects under development. We continue to broaden our base of partners to address the region’s need for $100 billion in annual infrastructure investments.

Legal Advice & Expert Opinions

We provides legal advice in the form of early case assessments, expert opinions and regulatory / contract drafting in international sports law matters.

The sectors covered include not only football but also all Olympic and non-Olympic sports, in contractual, disciplinary (doping-related and other, non-doping disciplinary disputes) and governance issues.

We also deliver tailored research and legal advice to national and international sports-governing bodies aiming to optimize their regulatory framework / dispute resolution mechanisms and comply with international standards of good governance.

We equally provides assistance in sport mediation. Our Founding Partner has extensive experience in contractual, election and governance issues that were successfully resolved through mediation and can effectively accompany her clients in CAS mediation proceedings or act as mediator in ad hoc mediation proceedings.

Dispute Resolution

We represents clients in contractual, disciplinary and governance sports-related matters before CAS, FIFA, UEFA and other major sports judicial instances/ arbitral institutions based in Switzerland and abroad. Our partners have  a longstanding and in-depth knowledge of the mechanics and the CAS jurisprudence.

Structure of CAS

CAS is based Lausanne, in Switzerland. In accordance with the Code of Sports-related Arbitration (the Code), the law of the seat of all CAS Arbitration Panels will be Lausanne. This means that any challenge or enforcement of a CAS award will fall to be determined in accordance with Swiss Law. Swiss law is ‘pro-arbitration’, and the grounds for setting aside are subsequently narrow. Additionally, sports arbitration awards are enforceable pursuant to the New York Convention.

CAS is broadly separated into two divisions: the CAS Ordinary Division and the CAS Appeal Arbitration Division. The International Council for Arbitration for Sport (ICAS) performs a similar role to that of any other arbitral institution. ICAS is responsible for the oversight of the Code, appointment of arbitrators from the CAS list of approved arbitrators, and deals with the challenge and removal of arbitrators. Each division has their own President to oversee the administrative function of that division.

The Ordinary Division works in the same way as any commercial arbitration institution. They hear cases that are brought pursuant to an arbitration agreement in a contract, a governing body’s rules, or an agreement to arbitrate after a dispute has arisen. The dispute must be directly or indirectly linked to sport. This includes commercial contracts that have sport as their subject matter, including sponsorship agreements, media rights, transfer regulations and employment issues.

In the Appeal Arbitration Division, CAS acts as a court of final appeal for decisions taken by competent sports authorities, either at a national, international or sport-specific level. The rules of the federation, association or other sports-related body must contain provision for the referral of any appeal to CAS. One example of this can be found in the Union Cycliste Internationale (UCI) Regulations. Any disciplinary decision from Disciplinary Commission can be referred to CAS within 8 days of the decision. Similarly, the World Anti-Doping Agency (WADA) rules allow for athletes to appeal any decision regarding doping violations to the CAS.

In addition, an appeal may be made of a decision of the Ordinary Division, but only if an appeal is expressly permitted under the rules of the federation or sports-body concerned.

Procedural rules

The procedural rules of the Code are split into 3 constituent parts: the General Provisions, the Special Provisions Applicable to the Ordinary Arbitration Procedure (the Ordinary Procedure) and the Special Provisions Applicable to the Appeal Arbitration Procedure (the Appeal Procedure).

The General Provisions are common principles throughout arbitration. They relate to the seat, language, independence and removal of arbitrators, and administrative matters such as language and time limits. The General Provisions set out the procedure for seeking provisional or conservatory measures. The applicant seeking preliminary relief must show “irreparable harm, the likelihood of success on the merits of the claim, and whether the interests of the Applicant outweigh those of the Respondents (R37 The Code). Arbitration practitioners will recognize this as the international benchmark for interim measures that is commonplace throughout commercial arbitration.

Similarly, the Ordinary Procedure resembles generally accepted practice in the international commercial arbitration procedure. One significant divergence with ordinary arbitration practice, is that where the parties have not chosen a substantive law to govern the merits of the dispute, then Swiss law will apply (R45, The Code). This compares to what is more commonplace under other institutional rules, which tend to allow the arbitral tribunal to select the most appropriate law to apply to the substance of the dispute in the absence of an express choice of law by the parties (see Art 21 ICC Rules and Article 22.3 LCIA). Parties should be aware of this at the outset when drafting contracts with a CAS dispute resolution clause.

The Appeal Procedure is somewhat less familiar to those accustomed to regular commercial arbitration. In the absence of anything to the contrary in the rules of the sports-body or federation, a Statement of Appeal must be made within 21 days. The responding party will then have 20 days to issue any statement of defence, along with any evidence. In a similar vein to commercial arbitration, the default position is that the panel will be made up of three arbitrators. However, unlike in commercial arbitration, the President of the Appeal Division may invite multiple parties to refer their cases to the same panel where they involve the same issues.

The scope of the review that the panel may undertake in the Appeal Procedure is broad. It may review all the facts and law presented at first instance again, and hold hearings to facilitate its decisions. The panel can issue a new decision to replace that made at first instance, it may annul a decision, or remit the case back to the sports-body or federation.

The law applicable to the merits in the Appeal Procedure is determined in accordance with the regulations applicable, and where silent, the choice of the parties. Where the parties have not reached an agreement as to choice then the law of the domicile of the federation or sports-body in question is domiciled, or in accordance with the law the panel deems appropriate.

Unless the parties agree otherwise, the Appeal Procedure provides that the award and a summary of the award will be made public by CAS. This has led to a body of jurisprudence developing around a number of important issues, which despite having no strict precedential value, is nevertheless highly influential on arbitrators hearing subsequent cases.

Conclusion

While there are peculiarities of CAS arbitration, and the flexibility that it must and is able to exert around major competitions, CAS arbitration is fundamentally not hugely dissimilar to other forms of institutional commercial arbitration. As the commercialization of sport and the potential for business disputes to be referred to the CAS grows, it will have to continue to evolve just as other arbitral institutions have done in recent years. As an alternative to litigation of sporting disputes, it is well-placed to do so, representing an efficient and focused forum for the settlement of a broad range of sport-related disputes.

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