A comprehensive investigation is a primary requisite at the time of investing. Sizeable deals have immense risk involved that needs to be identified. A detailed Financial Due Diligence (Buy-Side) is a primary requirement for the same.
Due Diligence Overview
Due Diligence is discovering the information that a reasonable person would want to know before investing. It is a deliberate, thorough investigation of a potential investment to validate all facts such as reviewing all financial records, assessing risk and compliance issues, conducting tax and financial planning, and identifying hidden cost. Due Diligence Outsourcing is a smooth way to evaluate and investigate a prospective business decision by getting information about the legal, intellectual, financial, and other material information from the seller.
Financial Due Diligence (Buy-Side) Overview
A Buy-Side Due Diligence is an exhaustive review of a target company when a buyer wants to acquire it. In such a situation, the buyer needs to analyze all the financial, commercial, and operational assumptions being made. Buy-Side Due Diligence includes the examination and analysis of revenues, analyses of contingent liabilities, validation of synergies etc. to determine the suitability and the key issues that can arise in the future. There is a strong focus on the financial business drivers so that historic and projected results can be determined. It inspects all the areas of the company.
Importance of a Financial Due Diligence
- It enhances the purchaser’s understanding of the target business and therefore increases the likelihood of the deal achieving its objectives.
- It addresses the positive and negative attributes of a deal.
- It helps in identifying and understanding the critical success factors which will result in improved understanding of all the relevant issues in the deal.
- It helps in identifying the quality of earnings adjustments—sustained level of EBITDA going forward on a standalone basis.
- It helps in identifying the potential debt-like items—highlights significant off-balance sheet liabilities, commitments and contingencies or other significant items that may affect the future financial performance of the company.
- It helps in identifying the working capital trends and adjustments—working capital levels of the company, cash flow impact of movement in the working capital levels, estimating benchmarks and potential adjustments required to assess the normalized level of working capital required.
- It analyses the capital expenditure trends, employment issues, management information system, control environment etc.
- It helps in identifying the pending tax assessments and litigations from a direct and indirect tax perspective.
How we support you?
Our team at Veristrat understands the intricacies involved in Due Diligence Offshoring and we strive to do our best in order to achieve superior results for our clients. We assist our clients in the following ways:
- By getting the comprehensive understanding of the target company.
- By getting an understanding of possible risks in all areas of the organization (including legal liabilities or compliance issues)
- By checking, fine tuning and extending the potential synergies and assigning them to business owners.
- By assessing the future order intake and seeing if it matches the projected numbers.
- By assessing the competency of managers and senior business leaders.
- By clearly identifying the business drivers that will be critical to the future success of the company.
- By getting a critical opinion on how realistic a purchase price is.
- By spotting material deal breakers (when there is still time to stop a transaction)
- By getting input for future legal documents (LOIs and SPAs)
- By identifying the shortcomings to overcome.
- By providing Input to fine tune the business plan.
- By preparing for post-acquisition integration.