Financial Due Diligence
Financial due diligence is the in-depth analysis of the financial and economic performance of a company aimed at identifying and normalising aspects that are discretionary, one-off, non-recurring or non-business related and hat distort the company’s operating result or capital structure. For a company seeking investors, it is essential to conduct a financial due diligence, to anticipate what will be the questions and in-depth analysis by the counterparty and to prevent false expectations or repercussions in terms of value.
What are the main areas covered by a financial due diligence?
- The determination of total financial debt (also called net financial position or NFP)
- The determination of the gross operating margin level (also called quality of earnings and adjusted EBITDA)
- The analysis of net working capital and the determination of the level of net working capital functional to the business (also called adjusted net working capital)