Financial Due Diligence
Financial Due Diligence. Know What You Are Buying.
Independent analysis of earnings, cash, working capital, and risk, so the price you agree is the price the business is worth.
Quick Answer
What are financial due diligence services?
Financial due diligence services examine a target company's earnings quality, revenue, margins, working capital, debt, forecasts, and controls before an acquisition or investment closes. The work confirms whether the agreed price is supported, identifies risks to address in the purchase agreement, and sets priorities for the first 90 days after closing.
Key Takeaways
- Diligence decides whether the LOI price survives.
- Quality of earnings is the core, but working capital and debt matter as much.
- Most engagements run four to eight weeks.
- Prepared sellers close faster and on better terms.
Last reviewed by the Sataurius advisory team.
What Diligence Is Really For
A letter of intent sets the headline price. Diligence decides whether that price survives. It surfaces the issues that change value, from overstated earnings to working capital shortfalls, so they can be priced, protected against, or walked away from before closing rather than discovered after.
Our Diligence Scope
- Quality of earnings and adjusted EBITDA
- Revenue, customer concentration, and retention analysis
- Net working capital analysis and peg recommendation
- Debt and debt-like items
- Forecast and budget credibility review
- Finance function, systems, and controls assessment
- Post-close integration priorities for the first 90 days
Buy-Side and Sell-Side Support
Buyers use our diligence to validate a deal. Sellers use the same work in reverse to get ahead of buyer questions. See our quality of earnings reports, our guide to what buyers should know before signing an LOI, and our wider transaction advisory services. After close, our 90-day integration framework applies.
FAQ
Frequently Asked Questions
What are financial due diligence services?
Financial due diligence services investigate a target company's financial history, earnings quality, cash flow, working capital, debt, and risks before an acquisition or investment closes. The goal is to confirm the buyer is paying the right price for what they are actually getting, and to inform deal terms and protections.
What does financial due diligence cover?
Core areas are quality of earnings, revenue and customer analysis, margin trends, net working capital, cash conversion, debt and debt-like items, forecast credibility, tax exposures, and the strength of the finance function and controls.
What is the difference between financial due diligence and a quality of earnings report?
A quality of earnings report is the central output of financial due diligence, focused on EBITDA. Financial due diligence is broader: it also covers forecasts, working capital mechanics, debt, tax exposures, and the risks that should shape the purchase agreement.
How long does financial due diligence take?
Most engagements take four to eight weeks between signing a letter of intent and closing, depending on deal size and how organized the seller's information is.
What should sellers prepare for buyer due diligence?
Three years of monthly financial statements, tax returns, customer and revenue detail, payroll records, debt agreements, key contracts, and reconciliations for every balance sheet account. Sellers who prepare a data room in advance usually close faster and on better terms.