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Financial Due Diligence
Mitigating risks, highlighting opportunities in transactions
Few things in any prospective business transaction are more important than a methodical, evidence-based financial due diligence process. On the buy side of a deal, this information can validate the asking price for an acquisition, or open one or more avenues for negotiating a better price. On the sell side, this process ensures that your company’s accounting systems and financial reports are accurate, well-organized and presented in the strongest possible light. In fact, a substandard financial due diligence effort can increase the risks—and diminish the value—of any transaction.
Our financial due diligence services include:
Accounting practices: Our team will review all accounting procedures for compliance with Generally Accepted Accounting Principles (GAAP). This may include assessments of capitalizable expenses, reserve adjustments, unconsolidated related parties, unrecorded audit adjustments, or any noncompliant revenue recognition or inventory accounting practices.
Normalizing financial data: We will remove all nonrecurring assets or liabilities from our analysis of the financial statements of a prospective acquisition, which helps you gain a much clearer picture of the normal cash flow, revenue and expenses.
Deal advisory: This is due diligence specific to deal-related financial or contractual issues, such as purchase agreement reviews, earn-out calculations or assessments of debt acquired as part of an acquisition.
Proforma summary: We provide a complete review and report of activities or events that affect a deal’s profitability and long-term financial viability, including pricing changes, insourcing or outsourcing trends, assessments of new products, new or closed facilities and new or lost customers, and cost-control initiatives.
Working capital review and assistance: In a transaction, working capital is generally calculated as the operating liquidity a new owner has after subtracting current liabilities from current assets in the acquired company. Our team can help generate accurate working capital estimates by making adjustments for historical business trends and seasonality, reviewing if GAAP have been consistently applied in financial statements, and using this information to make final adjustments to post-closing cash flow calculations.
Trust RSM’s knowledgeable, highly skilled transaction advisory professionals to design and deliver a package of financial due diligence services that can add measurable value to your buy- or sell-side needs.