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Financial Due Diligence

Our Financial Due Diligence is an extensive investigation or audit of the potential investment to confirm the facts that could significantly influence investment decision making, be it a merger or acquisition, issuing new stocks, or any other transaction where risk is relevant and necessary to make a decision using reasonable care. We will conduct an assessment of the company's business, the productivity of assets, the capabilities of operations, and the financial performance. Investment transactions that undergo a due diligence process offer higher chances of success. Due diligence contributes to making informed decisions by enhancing the quality of information available and identifying all material risks.

A systematic process helps to ensure that buyers and others are on the same page at the time of 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.

From a buyer’s perspective

Due diligence allows the buyer to feel more comfortable that his or her expectations regarding the transaction are correct. In mergers and acquisitions (M&A), Private Equity Investments, or Venture Capital Investments, purchasing a business without doing due diligence substantially increases the risk to the purchaser.

From a seller’s perspective

Due diligence is conducted to provide the purchaser with trust. However, due diligence may also benefit the seller, as going through the rigorous financial examination may, in fact, reveal that the fair market value of the seller’s company is more than what was initially thought to be the case. Therefore, it is not uncommon for sellers to prepare due diligence reports themselves prior to potential transactions.

Our Process:   

  • To confirm and verify information that was brought up during the deal or investment process;
  • To identify potential defects in the deal or investment opportunity and ensure the business transaction is de-risked;
  • To obtain information that would be useful in valuing the deal;
  • To make sure that the deal or investment opportunity complies with the investment or deal criteria;
  • Identify business gaps that influence the valuation.
  • These business gaps are analysed and documented to enable the company and investor to proactively close them and to determine which areas in the business the funding needs to be allocated to.
  • As part of the due diligence, we will focus on identifying the Risks (Red Flags, Amber Flags, Green Flags) and Business gaps in key functional areas.

Areas that we specifically focus on include:

  • Management and ownership and group structure;
  • The capitalisation of the company;
  • Revenue;
  • Profitability;
  • Margins and trends;
  • Competitors and industry metrics
  • Valuation multiples;
  • Material sections of the balance sheet;
  • Expectations of future performance and risk; and 
  • The capital structure.

    Due to the specific nature of this product and differing scope for each financial due diligence, our prices start from R25,000 (ex VAT) and can only be confirmed once we have conducted a planning and scoping meeting.

    We look forward to becoming your investment partner.