Financial due diligence has become a common standard for almost any kind of investment or business dealing such as mergers and acquisitions (“M&A”), issuing new stocks, and any other transaction that includes risk and involves the care that a reasonable entity should take before entering into an agreement. Every investment has its own level of risk, and without good research, the investor may be unable to understand that risk correctly.
A systematic process helps to ensure that buyers and others are on the same page at the time of a purchase. This method helps to prevent any entity from unnecessary harm to either party throughout a transaction. Evaluating risk accurately and acquiring the important and correct information needed to analyze another entity is the goal of financial due diligence.
Due diligence confirms that all entities are safe through the following essential considerations:
- Capitalization- How large and volatile is the company and market?
- Revenue, profit and margin trends- Are there any recent trends in the figures? Rising, falling, stable?
- Market competitors and industries- Research and compare the margins of competitors for a better understanding of the target company
- Management and ownership- Research who the company is run by. Is it still run by its founders?
- Stock history/options and possibilities- How long has the company been trading? For a short- term or long-term? Has there been a steady stock price?
- Balance sheet analysis- Analyze the debt-to-equity ratio. Is the company in too much debt?
- Risks- Understand industry-wide and company-specific risks. Are there outstanding risks?
- Expectations- What are the profit estimates for the future?
We want to ensure that our customers are content and assured when conducting business with others. Assure Consulting helps to achieve financial due diligence through investigations that ensure that the target company or investment is financially sound and that all material risks have been identified.