Financial Due Diligence
Our financial due diligence reports provide an independent assessment of target businesses which identify both ‘positives’ and ‘negatives’.
The review involves in-depth analysis and validation of financial information provided by the seller. It concludes with a report – not an excessively long report, which recites all facts picked up during our review – but a balanced document including the key facts and our opinions.
"In fact of all the deals that I have been involved in this was the first where the Financial Due Diligence Report was structured as a document to inform the deal principals rather than protect the Accounting Firm. Yes it included the normal caveats, but it was structured in an easy to read document that looked at the business in context to the market and the deal and used the financials to inform the Principals fully regarding the potential risks and critically how to mitigate those risks." Tony Walford, Mercer & Hole client
The ‘quantitative’ factors we review can include a detailed review of the accounts with particular emphasis placed on the profitability of the revenue streams & significant costs, the financial projections/assumptions, tax implications, sensitivities, cash-flow and working capital issues, inter-group transactions, accounting policies applied, opportunities for cost savings, capital expenditure requirements, asset valuation and the potential to miss bank covenants.
The ‘qualitative’ factors include; key management/employees’, customer concentration, issues which need to be notified to the legal due diligence team, the accounts production processes and other internal systems, supplier relationships, marketing plans, standard of auditing, quality of customers and the key contracts in place at the target business.
The final due diligence report will identify any potential ‘deal breakers’ and where appropriate should provide the client with enough information to negotiate the price and terms.
We have a wealth of due diligence experience at Mercer & Hole. This is derived from working for acquisitive companies, private equity and venture capital, banks, high net worth individuals, entrepreneurs, MBI teams and other clients. Our due diligence work is structured so that the client is constantly notified of key developments, so that deals can be reviewed and if necessary restructured at an early stage. Potential ‘deal-breakers’ are always raised as early as possible. We aim to work as part of a team with our client and their lawyers – we believe that three way communication is fundamental to completing a deal at the right price.