How can you confirm value when buying or selling a business?
If you are considering buying or selling a business, you want a high level of confidence in the value of a transaction before it is finalized. Due diligence must be performed on a wide range of information including legal, financial, commercial, operational, information technology, and environmental matters.
Financial due diligence is a significant component of this process because of the insight it provides into the health of the company. Financial due diligence helps both buyers and sellers uncover unrecorded liabilities, forecast future cash flow and financial needs, and determine appropriate value for the sale price. Due diligence can facilitate better negotiation of terms, uncover potential risks, and impact valuation and price.
- Quality of Earnings Document sustainability of earnings not reflected in a standard audit.
- Trend Analysis Provide visibility of key market drivers, sales strategies, customer and vendor relationships, and cost structure for potential post-transaction synergies.
- Working Capital Provide both buyers and sellers with reasonable working capital targets.
- Transaction Process Control Provide sellers with greater control over sales process and timing.
- Management Forecast Provide feasibility of key assumptions used for future earnings and cash flow.
- Credibility Verify information provided in the sale memorandum.
- Attain an unbiased, reliable picture of the company's current financial situation.
- Facilitate understanding of the company's capital structure and finance sources.
- Establish current and projected value of the investment.
- Identify areas for future growth or restructuring.
- Identify potential dealbreakers or other areas of concern.
- Information to assist in possible renegotiation of terms.
- Data to support your succession plan, exit strategy, defined market expansion, or new product feasibility.
- Prevention of post-transaction restitution.
- Evaluate financial risks before the transaction is final.