Financial due diligence is an investigative analysis of a business, group of assets, organised part of an enterprise or shares in the business, which involve an assessment of the key issues being faced by the business to acquire by the investor and the drivers behind maintainable profits and cash flows by identifying the key financial risks and potential deal breakers of the business acquisition transaction.
These transactions can be extremely challenging for an investor therefore, detailed understanding and knowledge of the business being considered for acquisition or investment can be considered as one of the key factors in making the accurate choice.
We exercise below listed key analysis for financial due diligence:
- Actual earnings, i.e., identification of sustainable earnings and one-off events.
- Financial projections
- Working capital and capital expenditure
- Competitor analysis including ROI analysis of the company and its competitors
- Control environment and Management information system
- Employment issues
- Long and short-term growth
- Risk analysis
- Commitments and contingent liabilities that may have an effect on the target’s financial performance or financial position after the transaction.