Enhanced Due Diligence

Bearstone develops detailed profiles of the companies and individuals with whom our clients are considering a business relationship. In particular, Bearstone’s enhanced due diligence investigations focus on finding “red flags”, or issues that might present reputational, legal or financial risks to our clients. Red flags include allegations of bribery or corruption, links to organised criminal groups, conflicts of interest, compliance issues and financial mismanagement.

We Provide

  • Corporate records data, including details of company ownership, directorships, and shareholdings, both current and historical.

  • Legal and financial profiles, including indications of participation in litigation and disputes, regulatory and licencing checks, solvency and credit profiles.

  • Cyber profile analysis, multilingual online media and social media research.

  • Reputation profiles based on human intelligence collection.

  • Background checks on principals, including residence and property ownership checks, employment and educational verification, assessment of net worth, origin of wealth, and more.

  • Confirmation of physical presence of registered offices, branches and subsidiaries.

Case Study

Bearstone was engaged by a global private equity fund that was scanning the market for acquisition targets. The main subject of interest was a regional pharmaceutical company that had entered into negotiations with the client.

Bearstone’s mandate involved investigating the target company itself, as well as its subsidiaries, affiliated companies, primary shareholders, directors and their close family members – with whom a probable conflict of interest was detected.  The assignment focused on several jurisdictions, spanning multiple continents.

We began by reviewing information provided by the client on the target company and its principals. We continued by collecting and analysing all relevant open source intelligence (OSINT) from the countries in which the target company and its principals operate.

The OSINT search included:

  • Multilingual, worldwide media coverage

  • Corporate records, including current and historical ownership, directorships, and affiliated entities

  • Financial registries, including tax returns, financial statements, credit checks and ratings, and bankruptcies

  • Asset registries, including real estate and vehicle ownership

  • Court registries and litigation checks

  • Deep web searches of non-indexed databases and registries

  • Social media analysis of targets and associates and affiliates

During the next phase of the assignment, our team focused on collecting intelligence from human sources in the close circle of the target company and its principals, who were well placed to offer primary intelligence. The HUMINT collection activities included:

  • Thorough analysis of OSINT data to generate leads and avenues of approach

  • Identification of potential human sources

  • Structured interviews with the identified sources

Finally, we completed the HUMINT phase by analysing and processing the commentary gathered, translating where necessary. We structured source comments into packets of intelligence for easy analysis, assigning credibility levels to each packet using cross-verification and validation processes. Intelligence packets were linked directly to the key decisions facing the client, and the key findings were summarised in simple, actionable form.

During the collection phase, we uncovered several potentially problematic red flags, including:

  • Rumours of bribery; unsubstantiated, but nevertheless requiring deeper investigation

  • Potential legal issues stemming from an official investigation by the local prosecutor

  • A complex web of off-shore entities with nominee directors, making it difficult to ascertain the ultimate beneficial owners of the company

  • Another affiliated company, unreported by the acquisition target to the client during negotiations, and which was found to be critically important to the group structure

  • Indications that the business had been transferred from one affiliated company to another, which the company had not disclosed to the client

Our team raised the red flags with the client as soon as they became apparent, after which the client instructed us to proceed with an in-depth investigation into each matter of concern.

Deeper inquiries uncovered reasonable explanations for some of the red flags, which satisfied the risk appetite of our client. For the remaining red flags, Bearstone equipped the client with sufficient information to raise the issues with the company’s principals, from whom the client received sufficient assurances that the deal went ahead.