Financial Due Diligence

When looking to make an acquisition, performing due diligence as part of your investment appraisal is critical for success.

Financial Due Diligence

There are many reasons why you may be considering buying a company or business such as looking to access new sectors, new markets, new customers or new products.

Whatever the rationale, when looking to make an acquisition, performing due diligence as part of your investment appraisal is critical to the success of the transaction. Financial due diligence is a key part of your overall due diligence.

Comprehensive financial due diligence will provide you with a deep and insightful understanding of your potential target.  This will enable you to:

  • Ensure you pay the right price for the target
  • Understand the key risks
  • Evaluate the potential opportunities
  • Develop post deal plans in respect of value creation
  • Assist in raising finance which may be required as part of funding the deal

We can work with you to develop a scope of work which will help and assist you in answering some, or all, of the following areas and key questions:

  • Historical earnings: How have the historical earnings trends moved over recent years?  What have been the key factors influencing the reported historical earnings?
  • Quality of earnings: Are the reported earnings a true reflection of the underlying earnings of the business?  Have there been one-off items/events which have impacted reported earnings? 
  • Sustainable/maintainable earnings: Are the historical earnings sustainable/maintainable in the near term? 
  • Projected/future earnings: Are the key assumptions underpinning the projected earnings reasonable?  Are they in line with historical trends? What are the main areas of risks/upsides/sensitivities to the projected earnings?
  • Profits converting to cashflow: Do the profits convert to cash?  What are the drivers of profit to cash conversion? 
  • Cashflows: What are the cashflow dynamics of the business? What is the normalised level of working capital?
  • Balance sheet: Are there any ‘black holes’ in the balance sheet? Do the balance sheet movements reflect the underlying position of the business?  Are there any debt/debt-like items to be considered?

Our dedicated, highly experienced, Transaction Services team will work closely with you to:

  • Define a tailored scope of work to meet your specific needs;
  • Provide an insightful and commercial assessment of the target, highlighting key value drivers, risk areas and potential areas for opportunity;
  • Deliver a bespoke, commercial and issues focussed report with clear views and opinions; and
  • Use our expertise and experience to help you meet your strategic objectives, make the most of negotiation opportunities and minimise risk.

Our Transaction Services team advises a wide variety of clients including; private equity, debt funders, SME’s, large and multi-national companies across a range of sectors.