Cross-Border Due Diligence in CEE: From Financials to Different Jurisdictions

Due diligence is where deals either firm up or fall apart. In CEE it has its own quirks: local GAAP, owner influence, informal arrangements, and several jurisdictions in one structure. Here's what to check.

1. Financial diligence: normalisation

CEE financials often follow local GAAP, not IFRS. The first step is normalising EBITDA: removing the owner's above-market salary, personal costs, one-off events. The real recurring profit often differs from the reported figure.

2. Related-party transactions

In small and mid-sized companies, transactions with the owner's other businesses are common — rent, supply, loans. They must be identified and priced at arm's length, since they may disappear or change after the sale.

3. Legal and jurisdictional review

Cross-border deals bring several legal systems together. Check ownership structure, licences, key contracts (transferability), employment relationships, and potential disputes. Local legal and tax advice is essential, not optional.

4. Operational dependency

The critical question: how much does the business depend on the owner? If key relationships, knowledge or decisions rest on one person, that's a risk to be structured (earn-out, transition period).

5. Documentation gaps

FAQ

What matters most in CEE due diligence?

Normalising financials to international standards, identifying related-party transactions, checking contract transferability, and assessing owner dependency.

Do I need local advisers when buying in CEE?

Yes. Local legal and tax expertise is essential given jurisdictional differences and local accounting practice.