Analysis of the business model and the quality of financial information
We question the business model and assess the quality of the financial information.
Financial Due Diligence
In-depth analysis of the performance, profitability and financial structure of a target company
Why is a financial due diligence necessary?
An investment project in a target company relies on several assumptions: the intrinsic quality of the asset (customer base, reputation, production capacity…), normative profitability, cash flow generation, future debt capacity... Due Diligence consists of verifying the financial, economic and contractual data underlying these assumptions.
METHODOLOGY
We carry out an in-depth analytical review of the financial statements. We challenge the quality of the figures provided by the seller through benchmarking, consistency checks, interviews and, in some cases, cross-referencing with external documents.
Determination of normative profitability
We conduct an in-depth review of historical and current-year performance. We identify and quantify the adjustments to be made to the financial statements in order to determine the company's normative EBITDA.
Detailed financial analysis
We analyse historical investments (expansion and replacement CAPEX), working capital requirements, financial debt and EBITDA-to-cash conversion.
Summary of transaction impacts
We confirm or adjust the key aggregates (normative EBITDA, net debt, cash flow). We identify risks requiring specific coverage in the acquisition agreement. We also highlight value creation levers.
Our reports are generally structured around 5 main sections: a summary of key points of attention with their associated risk level (low, medium, high), an overview of the company’s business model, organisation and the quality of its financial information, an in-depth analysis of the income statement, balance sheet and cash flow statement, a determination of the transaction aggregates (adjusted EBITDA, adjusted net financial debt), and an overview of current trading and forecast data.
A statutory audit consists of verifying that the annual accounts do not contain material misstatements, using sampling or other selection methods. It also consists of verifying that they comply with a given accounting framework. Financial Due Diligence goes further: it puts the figures into perspective over several financial years (generally three historical years compared to just one for the statutory audit, plus the current year and sometimes future years through the business plan), it includes an analysis of economic performance (customer portfolio, price and volume growth, margin trends, cost structure…) and financial analysis (CAPEX, working capital, debt…) and, above all, aims to determine the transaction aggregates.
Once the parties have reached an understanding (generally after a letter of intent has been issued), the investor has a period of time to carry out in-depth diligence on the accounting, financial, legal and commercial elements made available by the seller. At the end of this phase, the investor is able to confirm its offer and move forward with drafting the legal documentation.
Due Diligence makes it possible to confirm the key assumptions of the investment thesis, to deepen knowledge of the target company (risks and opportunities), and to efficiently structure the transaction (optimising the share price and legal coverage, securing external financing).
WHAT WE OFFER
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Quality of our analyses
Rigorous analyses, based on proven methodologies and a keen understanding of financial issues.
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Tailored execution
Because every M&A transaction is unique, we adapt to each context and deliver decisive solutions.
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Independence and commitment
We are deeply committed to what we do. Beyond the deliverable, our clients seek and value the quality of our judgment.
