Overview

A prospective investor is concerned about the target’s:

1. Quality of earnings
2. Adequacy of working capital
3. Unrecorded or contingent liabilities.

We call upon due diligence to analyze these areas and, in broader context, to understand the business of a company, its risks and prospects. These objectives define the scope of due diligence and bring forward a range of tools, methods and techniques to perform the analysis.

The attached bundle includes forms and templates which I have developed during my years in buy-side private equity and investment advisory. Many of them are quite cross-functional and can be used in regular reviews of business performance. They will serve as transaction price adjustments, areas for further investigation or a negotiation piece in your discussions with sellers. A few highlights to mention:

– sales summary, portfolio statistics, product performance
– sales seasonality
– price-volume-mix effect
– staff analysis (cost split, turnover and retention)
– fixed assets and capex review
– inventory analysis
– complex financial statement analysis (DuPont, sources and uses of liquidity, cash conversion cycle)
– challenging management forecasts, evaluating the accuracy of previous budgets

As such, you will find it useful if you are:

– considering a target for potential acquisition
– assisting your client with a potential M&A transaction
– analyzing performance of a company you work for
– trying to understand your business better
– learning how to carry out due diligence

The Excel file contains 30 sheets and is accompanied by a detailed text guide.

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