Over the past few years, I have worked on a number of financial due diligence exercises for clients. This was either assessing possible/actual targets for acquisition, or on the other side, to provide the due diligence information to a third party to vet and review everything before it goes off.
Ultimately what you are trying to achieve in a financial due diligence exercise is to verify the financial information provided and to assess the underlying performance of the business.
This will involve looking back at past performance, current trading and the assumptions and robustness of the projections/potential going forward. It links not only to what you are buying but also what you are paying for and the value being placed on the business by the seller.
What does Due Diligence cover?
Well the scope of due Diligence covers a number of areas including:
Earnings
Assets
Liabilities (Actual and hidden)
Cashflow
Debt
Tax
Contracts
Leases
Complexity of structure
Marketplace
Projections
Price/Value/Comparables
Due diligence is time consuming and can often be tedious, but it is a vital element of the deal process. It is much better to walk away from a deal than to acquire something and find out afterwards that it is not what you expected. You may be able to claim on warranties etc. but yet more time, effort and money is wasted!
Availability of Information
I usually find very early on that I can have a good feel for how successful the due diligence is likely to be. From the initial request for information, it is always telling to see whether the information is then available, whether it is up-to-date and whether it turns out to be accurate. If there are early delays or a push back on providing information, there is usually a reason, and not normally a good one!
Naturally financial due diligence is only part of the overall due diligence that needs to be undertaken to decide whether to go forward with a deal. However, in my experience, the deal lives or dies by the financial due diligence.
Snowball’s Role
Snowball can help companies by carrying out financial due diligence on differing levels of detail, i.e. headline review to shortlist a
number of targets, through to full due diligence for the purposes of an acquisition. We can also help clients on the other side of
a deal, where companies have to provide information to potential buyers, investors or private equity.
We are able to arrange, review and package the correct information, ensuring the third party receives timely, up-to-date and accurate information, with the full knowledge how the information pack will be received and reviewed at the other end by the third party.
If we can help, please do get in touch. Or you you call Peter on 0161 0464 8448 or 07525 619092