Overview

An acquisition in progress. A reputed audit firm already involved. Yet no clear visibility into statutory liabilities. A leading FMCG company, during the acquisition of another entity, faced uncertainty around statutory and long-term liabilities related to PF, ESI, Gratuity, and structural compliance risks.

Despite the involvement of a reputed audit firm, the actual financial exposure had not been accurately assessed. This created a high risk of undervaluation and significant post-acquisition financial exposure.

The situation required a deeper, compliance-first evaluation to establish true liability exposure before completing the acquisition.

C-Quel’s Solution

C-Quel applied a compliance-first due diligence methodology, prioritising real liability exposure over reported figures.

• Establishing True Liability Visibility

C-Quel conducted a comprehensive due diligence audit to establish accurate visibility into statutory and long-term liabilities.
This included detailed analysis of PF, ESI, Gratuity, and wage structuring components to determine actual financial exposure.

• Ground-Level Validation Beyond Reported Data

The assessment was based on ground-level validation of records, wage structures, and statutory filings rather than relying solely on reported data.
This approach ensured that liabilities were evaluated based on actual compliance conditions.

• Identification of Hidden and Misclassified Liabilities

The audit uncovered significant unreported, misclassified, and underestimated liabilities that had been overlooked in the original audit.
These gaps highlighted critical limitations in the existing audit approach.

• Enabling Accurate Valuation and Decision-Making

C-Quel enabled the client to accurately quantify total liability exposure prior to acquisition closure.
This provided clarity for informed valuation and negotiation decisions before completing the transaction.

Conclusion

The due diligence exercise established clear financial visibility and uncovered critical gaps in liability estimation.

The outcome:

• Hidden and underestimated liabilities were identified
• Total exposure was accurately quantified before acquisition closure
• Risk of post-acquisition financial shocks was mitigated

The intervention prevented a potential underestimation of liabilities, safeguarding approximately ₹40 crore in financial exposure.

This engagement demonstrated how compliance-led due diligence can directly impact deal value and risk mitigation.

De-risk your acquisitions. Uncover true financial exposure. Connect with C-Quel.