The Discipline
What is Financial Due Diligence?
FDD is an independent, detailed analysis of a company's financial performance, business operations, cash flows, assets, liabilities, working capital requirements, tax positions, and future sustainability — giving investors and business owners clarity before making significant financial commitments.
- 01 Are the reported revenues genuine and sustainable?
- 02 Are there any undisclosed liabilities?
- 03 Is the profitability of the business sustainable?
- 04 Is the working capital requirement accurately represented?
- 05 Are there any financial or tax risks?
- 06 Is the company worth the proposed investment or acquisition price?
- 07 Are there any issues that could affect future growth or profitability?
Our Financial Due Diligence Services Include
Six areas of review that together build the full risk and value picture of a target business.
Quality of Earnings
- Revenue recognition policies
- Sustainability of earnings
- Non-recurring income & expenses
- EBITDA adjustments
- Gross margin analysis
- Customer concentration risks
Financial Statement Review
- Balance sheets
- Profit & loss statements
- Cash flow statements
- Bank statements & trial balances
- Financial projections
- MIS & management accounts
Working Capital Analysis
- Inventory management
- Trade receivables & payables
- Working capital cycles
- Operating cash flows
- Debtor ageing analysis
- Inventory ageing reports
Revenue & Expense Verification
- Revenue sustainability
- Major customer dependencies
- Related party transactions
- Cost structures & vendor analysis
- Fixed & variable cost trends
Investment & Acquisition DD
M&A
Private Equity
Venture Capital
Joint Ventures
Share Purchases
Risk Identification
- Financial reporting risk
- Regulatory compliance
- Tax exposures
- Working capital deficiencies
- Revenue leakages
- Operational inefficiencies
Our Financial Due Diligence Process
A five-stage engagement, from scoping the transaction to a decision-ready report.
01
Understanding Transaction Objectives
Purpose of investmentAcquisition objectivesIndustry dynamicsTransaction sizeStakeholder requirements
02
Data Collection
Audited financial statementsGST & income tax returnsManagement reportsBank statementsAgreements & contractsDebtor & creditor listsLoan documentsShareholding detailsFinancial projections
03
Financial Analysis
Ratio & trend analysisMargin analysisWorking capital assessmentCash flow analysisQuality of earnings reviewFinancial risk assessment
04
Identification of Red Flags
Revenue overstatementCash flow concernsCustomer concentrationHigh debtor balancesContingent liabilitiesCompliance issuesWeak internal controls
05
Comprehensive Due Diligence Report
Executive summaryKey financial findingsTransaction risksFinancial adjustmentsRecommendationsNegotiation considerations
Stage 04, In Focus
Red flags a diligence review is built to catch
EarningsRevenue overstatement or aggressive recognition timing
LiquidityCash flow concerns and undisclosed liabilities
ConcentrationHeavy reliance on a small number of customers
ReceivablesHigh or ageing debtor balances
ContingenciesSignificant off-balance-sheet exposures
ComplianceGaps in tax or regulatory filings
ControlsWeak internal financial controls
ReportingFinancial misstatements or restatement risk
Who Typically Needs Financial Due Diligence
FDD serves both sides of a transaction, and the parties funding or approving it.
Buyers & Investors
Confirming the numbers behind the asking price before capital is committed.
Sellers
Vendor due diligence that surfaces issues early and supports a smoother negotiation.
Lenders
Assessing cash flow strength and covenant headroom before extending debt financing.
Boards & Founders
Independent validation to support fiduciary decisions and investor conversations.
A Typical Engagement Timeline
Indicative phasing for a mid-sized transaction; scope and complexity can extend this.
Week 1
Scoping, document request list, and access to the data room.
Week 2
Financial analysis, management interviews, and site walkthroughs.
Week 3
Red flag identification and quality of earnings adjustments.
Week 4
Draft report, management response, and final sign-off.
Why Financial Due Diligence Matters
The outcomes a thorough review protects across a transaction.
Identify hidden financial risks before they become your liability.
Validate business performance against what's been represented.
Verify reported profitability with independent analysis.
Assess cash flow sustainability under real operating conditions.
Evaluate true working capital requirements going forward.
Support informed price negotiations with evidence.
Minimise investment risk before capital is committed.
Strengthen decision-making and protect stakeholder interests.
Frequently Asked Questions
Common questions we're asked before an engagement begins.
An audit gives assurance that financial statements comply with accounting standards as at a date. FDD looks forward — testing whether earnings, cash flow, and working capital are sustainable enough to support the price and structure of a specific transaction.
Most engagements run three to four weeks from data room access to final report, depending on the size of the target, the quality of its records, and how quickly management responds to queries.
Yes. Engagements are governed by confidentiality agreements, and access to sensitive data is restricted to the diligence team working on the mandate.
A comprehensive report covering an executive summary, key financial findings, transaction risks, working capital and quality of earnings analysis, financial adjustments, and recommendations to support the investment decision.
Before you sign, know exactly what you're signing for.
Bring us into a transaction at scoping stage, closing stage, or anywhere in between.
Talk to Our Diligence Team