27 Apr 2020 Ankit Chadha

Financial Due Diligence: Potential Issues and Support

Financial Due Diligence | TRC Consulting

Financial due diligence is different from an audit. An audit offers an opinion on whether the historical financial statements fairly present the financial position of a company. Whereas, financial due diligence, goes more in-depth to comprehend the reasons behind historical and forecasted trends and reports on the relevancy of these facts to the buyer.  

The scope of financial due diligence varies from business to business, depending on the industry of the target company and size. Generally, the scope includes an analysis of the historical quality of earnings, quality of assets, working capital and capital expenditure requirements, financial debt and liabilities, and forecasted financial results. It uses past trading experience to peek into the future and confirms that there are no 'black holes.' We, at TRC Corporate Consulting, conduct due diligence review, credit evaluations and concise reports to support your company and help you thrive.  

When do you Need Due Diligence? 

Financial due diligence should ideally get commenced when a buyer is considering acquiring new business. Make sure to allocate adequate time to the whole process, depending on the size of the target company. You must begin the procedure as soon as possible while negotiating to buy a firm.?  

Potential Issues 

If you want to strengthen your business, your firm's core business undertakings by acquiring other companies having identical functions, you need to: 

  • Build on your company's existing actions by purchasing complementary products 

  • Gain access to its current products in new markets 

  • Expand your company's existing portfolio of products and services through the acquisition of new ones  

  • Spread your company's market risk by purchasing a company offering similar products 

How Financial Due Diligence Review Helps You? 

At TRC Corporate Consulting, our financial due diligence review provides answers to these crucial questions depending upon the scope of the process conducted, such as:  

  1. Is the information provided by the seller dependable?  

  1. Are the historical earnings of the firm sustainable? 

  1. What are the potential future incomes of the company?  

  1. What level of working capital should be involved while closing the transaction? 

  1. Has the company sufficiently invested in capital outflows?  

  1. Are there any on or off-balance sheet liabilities to consider? 

  1. Does the company have any future contingencies or commitments? 

After the successful completion, the financial due diligence review provides valuable insights to support the right purchase price and ensures the appropriate warranties and representations get included in the agreement. It also identifies the issues the buyer and vendor must address to complete a successful transaction. 

In short, the cost of performing professional financial due diligence far outweighs the cost of a bad acquisition. 

How TRC Consulting Supports You 

We, at TRC Corporate Consulting, are part of a group that has a rich experience of more than 70 years supporting businesses with positive results. Our role in financial due diligence involves evaluating the proposed deal by analyzing the present as well as historical financial statements, including essential agreements reviewing the control environment and assessing the risk incidental to the business. 

Our reviews enable you to identify the strengths & threats in your business opportunities and assess the capacity of the organization to address before and after the proposed transaction.  

We practice a focused approach for understanding the business and transaction methods for the analysis of the operative, financial, and commercial aspects of the business – to the identification of material risks. 

With experienced and qualified experts, we use multidisciplinary teams including corporate finance specialists, seasoned consultants, technical consultants along with legal experts, who are all aimed at adding value to your business by focusing on its critical areas. So, if you have any queries or need further understanding about our financial due diligence services, reach out to your team at TRC!