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A prospective investor is concerned about the target’s:

1. Quality of earnings
2. Adequacy of working capital
3. Unrecorded or contingent liabilities.

We call upon due diligence to analyze these areas and, in a broader context, to understand the business of a company, its risks, and prospects. These objectives define the scope of due diligence and bring about a range of tools, methods, and techniques to perform the analysis.

The attached bundle includes forms and templates which I have developed during my years in buy-side private equity and investment advisory. Many of them are quite cross-functional and can be used in regular reviews of business performance. They will serve as transaction price adjustments, areas for further investigation, or a negotiation piece in your discussions with sellers. A few highlights to mention:

● Complex Financial Statement Analysis
– DuPont Analysis
– Profit Variance Analysis (Bridge Charts)
– Sources and Uses of Liquidity

● Income Statement Analysis
– Overall Sales Analysis (Quality of Earnings Schedule, Like-for-Like Analysis)
– Seasonality (creating a cycle plot chart, de-seasonalizing sales, and calculating seasonal adjustments)
– Product Analysis (Key Portfolio Statistics, Product Profitability Distribution, Profit Variance Analysis by Product, Price-Volume-Mix Analysis, Product Ramp-up)
– Customer Analysis (Attrition (Churn) Analysis, Contract Expirations, and Pipeline, Customer Concentration)
– Employee Analysis (Employee Cost Summary Schedule, Headcount and Salaries, Employee Turnover and Retention, Employee Headcount Statistics)
– Budgeting And Forecasting (Assessing Budget Accuracy, Defining Scenarios Based on Historic Volatilities, Building a Trend Forecast, Interim Budgets, Current Forecast Status by Products, Estimating Reasonableness of the Outlook)

● Balance Sheet Analysis
– Fixed Assets (Fixed Asset Roll Forward, Capex Detalization Schedule)
– Inventory (Inventory Structure, Inventory Movements, and Balances, Days Inventory Outstanding, Inventory Seasonality, Inventory Aging)
– Cash (Cash Conversion Cycle (CCC))
– Net Working Capital
– Net Debt (Debt and Debt-Like Items)

As such, you will find it useful if you are:

– considering a target for potential acquisition
– assisting your client with a potential M&A transaction
– analyzing the performance of a company you work for
– trying to understand your business better
– learning how to carry out due diligence

The Excel file is accompanied by a detailed text guide. Feel free to reach out if you have any questions about any of my products.