FINANCIAL DUE DILIGENCE
All businesses involved in an acquisition, as buyers or sellers, need to ensure that the financial information they hold is as accurate as possible, not only to prevent paying too much (or in a seller's case receiving too little) but also to ensure that their governance and risk management objectives are met.
- From the buyer's perspective the quality of information available about a potential acquisition determines the ultimate success of a transaction. Without ensuring that the financial statements about a business reflect the reality, a deal may deliver less than first impressions suggest
- To ensure an efficient sales process, vendors need to present their financial information to potential buyers as transparently as possible. Independent assessment provides potential buyers with certainty about the business and the nature of its cash flow.
- Financial due-diligence can help to identify and focus attention on the factors in the business that will be critical to its future success.
- Public company board's governance responsibilities require them to ensure that all steps possible have been taken to identify any problematic issues in a potential acquisition.