A thorough due diligence process is crucial to identifying risks, accurate valuations, and aligning investments with strategic goals. No matter if you’re a privately-owned company looking to buy businesses or an operating partner the process of investment is extremely complex and requires the collection of various types of information concerning finance, IT, legal aspects as well as operational processes.
PE firms aren’t only interested in the bottom line. They are looking to improve operations and increase value of a business before closing. This requires a thorough investigation into the daily operations and management. PE firms conduct a variety of additional studies in addition to their typical due diligence in the financial sector. Analyzing key industry ratios such as working capital cycle, debt/equity and more. Viewing recent industry transactions, including their multiples
Legal due diligence: examining contracts and compliance with regulations, ongoing litigations, etc.
It is also essential to determine whether it is possible to boost the growth of the company you are considering by purchasing other assets and companies and in integrating them into its business. This will affect the performance and value of the target following the acquisition. This analysis includes a thorough review of the target company’s competitive landscape and customer base, as well as the possibility and feasibility of acquiring new customers/partnerships to speed up growth.