Conducting financial due diligence on potential investments or divestitures is a multifaceted undertaking rife with complexities at every turn. Obstructed visibility into the intricate details of a target company's historical financial performance, current financial health, reporting practices, future projections, risks, and value creation opportunities can severely impede investment analysis and decision-making.
Our specialized teams are equipped to methodically cut through these challenges to extract actionable insights tailored to our clients' objectives. We employ time-tested analytical frameworks to assess financial track records, performance drivers, working capital optimization, capital allocation, financial reporting quality, forecast reliability, debt capacity, valuation, risks, and prospective synergies. This multidimensional approach arms our clients with the comprehensive financial clarity essential to evaluate deals and make decisions with confidence.
Our financial due diligence services span buying-side and selling-side transaction support catered to our clients’ unique objectives.For potential acquirers, we offer unobstructed visibility into the financial anatomy of a target to inform opportunity assessments and planning. We dive deep into historical financial statements going back over 5-7 years analyzing growth, profitability, working capital, capex, and cash flow metrics while investigating performance inflection points. By identifying key ratio trends and catalysts, we enable extrapolation of future performance. Further dissection of reporting quality, forecast assumptions, debt capacity, valuation, and risks arm clients with the insights to ratify deal logic, model returns under various scenarios, and negotiate better terms.
For potential sellers, we help optimize their financial positioning and communications. Our historical analysis spots patterns and trends to explain in investor documents while assessing reporting quality checks relevant assumptions and forecasts. Working capital optimization and financial process improvements further bolster positioning. As needed, we suggest areas for additional diligence to anticipate buyer concerns. Our overall findings compel target financial profiles that maximize deal outcomes.
We analyze the financial statements dissecting revenue growth, profitability, working capital, capex, and cash flow key ratio trends, catalysts, and historical inflection points across business segments and global regions. Our granular historical financial analysis investigates performance swings, cyclicality, one-offs, and non-recurring items to reveal meaningful patterns, enabling analytical extrapolation of future performance.
Financial control weaknesses, information gaps, leverage concerns, customer/supplier concentrations, contractual risks, litigation liabilities, regulatory non-compliance and other red flag issues are identified via historical analysis, profiling and management interviews. Customized and actionable risk mitigation strategies are suggested to enable proactive addressing of identified concerns.
We thoroughly scrutinize financial statement elements focusing on adjustments to normalize EBITDA to ascertain true economic earnings quality, sustainability and ongoing earning capacity. This spans assessing revenue recognition practices, exclusions/inclusions in cost basis, reserves policies, capitalization criteria, non-operating items, discontinued operations and cash vs. non-cash categorizations in granularly breaking down EBIDTA constituents towards additive or deductive modifications. The resulting quality of earnings analysis furnishes adjusted EBITDA comprehension.
We conduct a comprehensive analysis of the entity's debt portfolio across short and long-term debt instruments. This encompasses scrutinizing principal outstanding amounts, interest rates, covenants, collateralization, maturity profiles, repayment schedules, refinancing risks, and currency considerations across all external debt like bank loans, bonds, convertibles, capital leases, and any other forms of leverage across the capital structure over a 10 year horizon. We match this extensive total debt profile with the latest cash, contractual & liquid investments position to accurately establish an entity's net debt level incorporating relevant adjustments.
We employ a bottoms-up approach constructing trends for historical working capital cycles, granular requirements across inventory, payables and receivables by business segments through a combination of historical analysis and relevant peer benchmarks. Optimization opportunities to unlock trapped capital are identified at each component level and aggregated to inform projections and planning.
We thoroughly scrutinize accounting policies, critical management estimates, key assumptions, internal controls, reporting systems, IT infrastructure controls and multi-year audit findings via sample tests and interviews. Assessment of reporting transparency, decision usefulness, underlying control infrastructure quality including process and system integration, analytics capabilities and scope for misrepresentation or gaps arms clients with view on reliability.
We assess the capabilities and track record of a target company's management team. Our team evaluates their experience, qualifications, leadership styles, and strategic decision-making abilities. By analyzing the management team's effectiveness, we help our clients gauge the company's ability to execute strategies, adapt to market changes, and drive long-term growth.
We provide recommendations and strategies to improve operational efficiency and optimize performance. Our team identifies areas where cost savings, process improvements, and productivity enhancements can be achieved. By suggesting practical and actionable measures, we assist our clients in unlocking hidden value and enhancing the overall operational performance of the target company.
We conduct a comprehensive analysis of the target company's industry, market dynamics, and competitive landscape. Our team evaluates market trends, customer preferences, competitive positioning, and growth opportunities. By understanding the market context, we help our clients assess the potential for growth, market share expansion, and competitive advantage.
Our engagement does not end with the investment decision. We provide ongoing support to our clients to ensure the successful integration and realization of value from their investments. We offer expertise in post-investment operational performance monitoring, performance improvement initiatives, and risk management strategies.
We evaluate existing debt service coverage capacity through business cycles, ability to absorb additional leverage considering risk appetite, refinancing needs, financing options like bonds versus loans given credit ratings, investor feedback and markets accessibility to fund deals. This enables alignment with clients on appropriate capital structure decisions.
Detailed LBO and DCF analysis incorporates historical performance trends, our diligenced projections, optimal capital structure, granular working capital dynamics and value creation levers customized to client specs including potential synergies, footprint expansion and risk-adjusted outlooks. Rigorously built models establish reasonable value expectations under base, downside and upside cases to inform negotiations.
We rigorously vet existing projections while building proprietary models assessing feasibility of granular assumptions across business segments and regions. Revenue growth, profitability, cost structures, capex, taxes and working capital inputs are stressed via sensitivity analysis under different scenarios to gauge reliability. Management interviews focused on understanding builder confidence levels in forecasting abilities further inform diligencing.
