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Financial Due Diligence

Introduction

Financial Due Diligence (FDD) is a critical part of the Mergers and Acquisitions (M&A) process, helping buyers, investors, or stakeholders assess the financial health and risks of a target company. At DGA Global, we provide in-depth due diligence consulting services to uncover key financial insights, validate assumptions, and assist in informed decision-making. As a provider of due diligence in consulting and business advisory services , we ensure businesses have a clear and accurate financial picture before making critical investment decisions.

Our Financial Due Diligence Offerings

  1. Pre-Transaction Due Diligence
  • Evaluation of Financial Statements:
  • Historical financial statements review for accuracy, reliability, and compliance with reporting standards (IFRS, US GAAP, or local GAAP).
  • Adjusted EBITDA and normalized working capital analysis.
  • Cash Flow Assessment:
  • Reviewing operating cash flow trends to ensure the company generates sustainable cash flows.
  • Analyzing seasonality impacts, one-time cash inflows/outflows, and cash conversion cycles.
  • Profitability Analysis:
  • Assessing the key drivers of profitability, including revenue trends, gross margins, and cost structures.
  • Identifying non-recurring and discretionary expenses.
  • Debt and Financing Analysis:
  • Reviewing the company’s debt structure, covenants, and leverage ratios.
  • Evaluating repayment terms, interest costs, and refinancing risks.

  1. Post-Transaction Support
  • Integration Planning:
  • Identifying synergies and operational improvements to integrate financial functions seamlessly.
  • Supporting in creating a post-acquisition financial plan.
  • Purchase Price Allocation (PPA):
  • Assistance in allocating the purchase price to assets and liabilities as per applicable accounting standards.
  • Working Capital Adjustments:
  • Calculating and negotiating the final working capital adjustments in the purchase agreement.

  1. Financial Health Assessment
  • Revenue and Cost Analysis:
  • Analyzing revenue streams, customer concentration, and recurring versus one-time revenues.
  • Examining fixed versus variable costs and identifying cost-saving opportunities.
  • Quality of Earnings (QoE):
  • Evaluating earnings sustainability by adjusting for one-time events, unusual income/expenses, and accounting policies.
  • Expense and Cost Review:
  • Assessing cost structures, vendor agreements, and fixed versus variable costs to evaluate scalability and profitability.

  1. Risk Assessment and Mitigation
  • Risk Identification:
  • Identifying key operational, financial, and market risks that may impact the deal value.
  • Reviewing pending litigations, environmental obligations, or regulatory compliance concerns.
  • Internal Controls Evaluation:
  • Assessing the internal control framework for financial reporting and operational integrity.
  • Fraud Risk Assessment:
  • Investigating historical data and processes for signs of fraudulent activity.

  1. Industry and Market Analysis
  • Benchmarking Against Industry Standards:
  • Comparing the target’s financial performance with industry peers.
  • Analyzing market trends, regulatory changes, and competitive positioning.
  • Revenue Diversification:
  • Assessing market concentration risks and identifying new revenue opportunities.

  1. Working Capital Review
  • Normalized Working Capital Calculation:
  • Evaluating accounts receivable, accounts payable, and inventory levels to determine a sustainable working capital position.
  • Identifying seasonal variations and working capital efficiency improvements.

  1. Deal Structuring Support
  • Valuation Support:
  • Assisting in financial projections, business valuations, and scenario analysis.
  • Reviewing the assumptions used in valuation models for accuracy and reliability.
  • Transaction Negotiations:
  • Providing data-driven insights to strengthen negotiation strategies.
  • Highlighting red flags and areas requiring renegotiation.

  1. Exit Due Diligence (Vendor Due Diligence)
  • Preparing Sellers for Transaction:
  • Assisting in preparing comprehensive financial reports for potential buyers.
  • Identifying gaps in financial records and addressing them proactively.
  • Data Room Preparation:
  • Creating and managing the virtual data room for the transaction.
  • Ensuring accurate and timely access to all financial data for stakeholders.


Why Choose DGA Global for Financial Due Diligence?

  • Experienced Team: A skilled team with expertise in audits, tax, valuations, and risk management across diverse industries.
  • Global Standards: Adherence to global reporting standards (IFRS, US GAAP) and localized knowledge to ensure compliance.
  • Comprehensive Analysis: In-depth evaluations to uncover hidden risks and ensure transparency in every transaction.
  • Tailored Solutions: Customized due diligence approaches to meet the specific needs of buyers, sellers, or investors.
  • Efficient Turnaround: Delivering accurate and actionable insights within tight timelines

With DGA Global’s due diligence services in India, businesses can navigate M&A transactions with confidence, backed by thorough financial assessments and expert insights through our client advisory services.