A process of critical analysis is essential for successful acquisition or partnership. It equips buyers as well as investment partners and lenders with a clear understanding of the story behind the numbers, different than conventional reporting or audits can reveal. Understanding the financial,accounting and business processes provides clarity that can help protect a company's investment, its investors and ultimately its reputation.
In finance due diligence we analyze a target company's books, records and other internal reports and documents for financial and business trends. The diligence exercise probes deeply into the quality and sustainability of earnings by examining underlying risks and exploring previous financial performance to determine whether it can reasonably be expected to continue, and to understand how changing circumstances and trends may impact the future of the business.
Going beyond the numbers, due diligence professionals meet with the target company's financial and non-financial management to understand the larger context of the business, identifying potential problems or areas that may impact the investment thesis. We look at the financial implications of findings, analyze projections, and help structure a deal that optimizes both risk and tax implications.
While the length of time necessary for effective due diligence varies with every project, it is prudent to build it into every transactions. Our typical steps include:
- Understanding the essence of the potential transaction, including the investment thesis and key value drivers for the potential investors.
- Understanding the specific risk areas that requires focus, and tailor procedures to be performed.
- Manage all requests for information, and work with management to establish an appropriate work - plan.
- Perform detailed procedures including financial analysis, detailed discussion with management and site visits, when applicable.
- Provide real time updates and present draft findings and reports to ensure that the purchaser is aware of all issues, and to be confident that the final report will meet the stakeholders needs.
Now more than ever, we believe an effective and comprehensive due diligence process can help mitigate organizational reputation and financial risks. Savvy leaders,no matter what the size of their organization or the transaction, know that experienced due diligence professionals can be their partners in executing smooth transactions for successful growth.