Financial Due Diligence Service
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Overview of Financial Due Diligence Service
Buying and selling businesses, and assets, or even investing in large projects can be risky. Objective due diligence can help mitigate these risks while also highlighting opportunities to add value and close a transaction.
Furthermore, when deciding whether to proceed with a transaction, financial due diligence is critical and can increase the likelihood of the transaction achieving its goals. The due diligence process will also assist you in structuring the transaction and preparing for negotiations.
The Startup Gig service includes financial, tax, and broader analysis to identify both the risks and opportunities of a potential transaction, allowing you to make better decisions and negotiate better outcomes.
Why choose The Startup Gig For Financial Due Diligence
Making the process easy
Financial due diligence is a critical step for most businesses, as their growth sees them engage actively in mergers and acquisitions (M&A). No deal goes through without adequate due diligence, and financial due diligence is often the most time-consuming part of the process.
At TSG we handhold startups to conduct the entire FDD. The scope of the FDD exercise differs based on the industry, scale of business and size of the company.
Analyzing the revenue model
We analyze revenue generation model and assess the quality of earnings, cash flows and margins. We further evaluate sustainability of revenue considering factors such as taxes, interest, depreciation, working capital, financial debts and liabilities. Report creates a detailed report based on an evaluation of other critical variables that may have an impact on the business.
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What makes financial due diligence necessary?
- Financial due diligence can help resolve issues that might arise later on during the transaction in advance.
- When both parties are aware of each other’s financial situations, an informed choice or negotiation can be made.
- The use of deliverables can be flexible because of financial due diligence.
- Both parties benefit from a third party’s objective assessment, which helps to build trust.
- It is possible to determine the entity’s potential future position, which will be a key deciding factor for both entities.
Types of Financial Due Diligence
There are generally two types of Financial due diligence. One of the buy side Financial Due diligence and the sell side due diligence.
- Buy-Side Due Diligence
The person who completes the financial due diligence is the business buyer or acquirer who intends to buy the target business in question. A family office, sovereign wealth fund, venture capitalist, strategic investor, investment bank, pension fund, insurance company, etc. are all examples of potential buyers. The financial health of the target company is the main subject of the buy-side FDD. Data on the company’s revenue, expenses, cash flow, balance sheet, debtors, creditors, profitability, growth rate, market share, etc. must be gathered. To fully understand the target’s financial situation, a buyer looking to buy a company or a start-up business would carry out buy-side financial due diligence. In a perfect world, the acquirer’s interests would be met and the target company’s financial position would be established as strong, stable, and with a bright future.
- Sell-Side Financial Due diligence
The seller or vendor of a business that is being sold, on the other hand, performs sell-side financial due diligence. This process concentrates on areas of interest for potential acquirers or buyers to avoid snags in the transaction. Sell-side financial due diligence benefits the seller by highlighting issues that might otherwise go undetected through an internal audit. A sell-side financial due diligence programme requires the same work; it is simply approached from a different perspective.
Why a startup should run for Financial Due Diligence?
There are generally two types of Financial due diligence. One of the buy side Financial Due diligence and the sell side due diligence.
- Buy-Side Due Diligence
The person who completes the financial due diligence is the business buyer or acquirer who intends to buy the target business in question. A family office, sovereign wealth fund, venture capitalist, strategic investor, investment bank, pension fund, insurance company, etc. are all examples of potential buyers. The financial health of the target company is the main subject of the buy-side FDD. Data on the company’s revenue, expenses, cash flow, balance sheet, debtors, creditors, profitability, growth rate, market share, etc. must be gathered. To fully understand the target’s financial situation, a buyer looking to buy a company or a start-up business would carry out buy-side financial due diligence. In a perfect world, the acquirer’s interests would be met and the target company’s financial position would be established as strong, stable, and with a bright future.
- Sell-Side Financial Due diligence
The seller or vendor of a business that is being sold, on the other hand, performs sell-side financial due diligence. This process concentrates on areas of interest for potential acquirers or buyers to avoid snags in the transaction. Sell-side financial due diligence benefits the seller by highlighting issues that might otherwise go undetected through an internal audit. A sell-side financial due diligence programme requires the same work; it is simply approached from a different perspective.
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