Financial Due Diligence

What is Financial Due Diligence?

Every investment has its own level of risk, and without due diligence, the investor may be unable to understand that correctly. A systematic process helps to ensure that buyers and other stakeholders are on the same page at the time of a purchase.

Financial due diligence is the process to verify and review a potential deal and investment opportunity that is used to confirm all relevant facts and financial information, and verification of anything brought up during M&A deals or investment process.

Introduction to our range of Financial Due Diligence services

• Assessing the key issues/risks faced by the business
• Focusing on business drivers behind maintainable profits and cash flows
• Identifying the key financial risks having potential impact on the transaction

Scope of work within Financial Due Diligence services

• Business Operations incl. model, service categories, supply chain, customers
• Revenue Analysis & Receivables incl. trends, recognition, dependencies, variations
• Cost and Margin Analysis incl. trends, major drivers, compliance
• Fixed Assets incl. physical verifications, application, records, depreciation
• Working Capital incl. collection terms, provisioning, monthly requirements
• Debt incl. terms, utilization, claim, notices
• Related Party Transactions incl., terms, personal transactions
• Financial Statements incl. quality and reliability
• Human Resources incl. policies, terms, commitments
• Risk Management incl. availability of SOP, RCM, testing results analysis
• Examination of availability of assets
• Analysis of quality of assets

Our Methodology for Financial Due Diligence

• Plan:

• Understand the business
• Understand the deal drivers
• Agree on expectations
• Desktop research

• Analyse History:

• Review the Financial Information – Basis of value
• Evaluate the quality of earnings and assets
• Accounting policies & practices
• Reliability of systems
• Relation to audited numbers

• Understand Future:

• Review the assumptions
• Market studies
• Compare with business drivers in historical period
• Review projections in line with History Analysis
• Understand management views on projections

Benefits of Financial Due Diligence

• Issues that could arise during transactions in future can be dealt in advance
• Helps in making an informed decision when both parties are in a mutual understanding of each other’s financial position
• Reduces redundancy and provides flexibility in use of deliverables
• Potential future position of the entity is ascertained as a crucial deal maker or breaker for both entities
• Understanding the actual financial performance of the organization
• Informed valuation decisions
• Transparency and comfort to the acquiring party
• Clear situation of key strengths and weakness
• Understanding of potential risks to the buyer

Our Deliverables

• Executive Summary
• Detailed financial due diligence Report
• Recommendations to the Buyer
• Financial Analytics

Adding value to the engagements

• Bring industry and geography perspective and knowledge
• Blend transaction, tax & forensic services competencies
• Transaction specialists with experience of deals covering many different industries
• Dedicated team of specialists, providing end-to-end solutions

With our financial due diligence services, we provide valuable information/insights about financial performance of the organization to support the proposed acquisition. It is completed before any deal closes to ensure a buyer with an assurance of what they’re getting.

Download Our Service Deck Financial Due Diligence