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Financial Due Diligence
Week 1
Design Research
4 videos, 1 reading
Video: The Interaction Design Specialization
20 m
Video: Introducing Elizabeth Gerber
40 m
Video: Who, What, Where, When and How People Work
35 m
Video: Michael Chapman of IDEO on Interviewing
20 m
Reading: Slides
30 m
Graded: Final Quiz: Design Research
5 Questions
Week 2
Ideation
2 videos
Video: The Interaction Design Specialization
20 m
Video: Introducing Elizabeth Gerber
40 m
Graded: Cumulative Quiz
4 Questions
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Financial Due Diligence

  /  Finance and financial management  /  Financial Due Diligence

Financial Due Diligence

About this course

Introduction

However how difficult business environment becomes, companies will continue to carry out Mergers and Acquisitions (M&As) and raise capital. However, today’s difficult financial environment will put added pressure on companies (for their deals) to enhance shareholder value. Managers who are relying on new strategies will find themselves racing against the clock to prove that their value proposition is real and to satisfy the terms being enforced by lenders. In addition, the softer economic times will place more importance on faster implementation of revenue synergies and cost-reduction initiatives. Any deviations between actual results and the original forecasts will place increased scrutiny on a transaction’s economics. What this means for acquirers is that achieving success in today’s environment is both more important and more challenging. Since many companies have not historically been successful at creating shareholder value through M&As, management teams need to quickly focus on how to improve their M&A and capital raise approach.

Whether selling or buying, management’s challenge is to beat the market odds and execute deals that deliver the value investors demand – this course will introduce you to the skills that help you make successful transactions even in tough times, including Due Diligence and related business valuation techniques.

Who Should Attend

This course is designed for those working within finance, investment and legal departments of medium to large corporates who are entrusted with the task of Due Diligence and/or Valuation and wish to consolidate their knowledge to make intelligent and successful investment decisions and transactions to add value to their organization.

Benefits of Attending

  • Appraise the quality and reliability of information following an efficient process
  • Identify and verify worthwhile investment opportunities
  • Analyse the financial and commercial aspects of an entity
  • Identify and overcome the most common Due Diligence pitfalls
  • Learn how to perform Due Diligence to win
  • Understand the concepts of business valuation and appreciate valuation drivers
  • Appreciate the importance of understanding cost of capital and how this impacts value

Course Content:

Introduction

  • What is due diligence?
  • Users (bank lenders, private equity firms and other providers of finance, as well as companies on behalf of their investors/ shareholders)
  • Who commissions and who pays
  • Liability of due diligence providers
  • Due diligence in the M&A timetable
  • The traditional process, with all buyers undertaking independent due diligence
  • A process underpinned by vendor due diligence, prepared ahead of wider marketing
  • The pros and cons of VDD
  • Smart preparation: Adding value through pre‐transaction due diligence/ Sale readiness review
  • Phasing: the various stages of data release
  • The evolution of data rooms
  • Interaction with other areas of information provision such as teaser, information memorandum, tours/ site visits, management presentations
  • Legal status of diligence reports
  • Due diligence from the target’s perspective; managing the subject of the investigation

The key areas of due diligence

  • An overview of each area, reviewing the key areas of investigation and typical/ potential findings, including:
  • Financial
  • Tax
  • Legal
  • Contracts
  • Plant and equipment
  • HR
  • Market, commercial and strategic analysis
  • Brand strength
  • Customer referencing
  • Property and land use
  • IT
  • Operational analysis, e.g. benchmarking
  • Insurance
  • Pensions
  • Regulatory compliance
  • Reputational enquiries
  • People/ psychometric/ behavioural
  • Patents/ IP
  • Competition risk
  • Environmental
  • Resources/ reserves
  • Synergies analysis, costs and benefits
  • Separation analysis ‐ Carve outs and proformas
  • Reciprocal due diligence ‐ on a buyer where part of the consideration is in shares
  • Discussion will include key areas of focus, examples of discoveries and potential risk areas
  • Presentation of key findings

Focus on financial due diligence

  • Quality of earnings
  • Net asset
  • Debt/debt-like review
  • Quality of working capital and cahsflows
  • Quality of information

Vendor assistance services

  • Pre‐sale preparation
  • Cleaning up businesses pre‐sale
  • Financial presentation in a form suitable for a transaction
  • Scope for value creation

How due diligence integrates with the definitive agreements and goes to value

  • Heads of agreement
  • The legal framework ‐ SPA and disclosure
  • Representations and warranties
  • Locked box or completion accounts elements – net debt and working capital ‐ final pricing
  • Potential for price chips
  • Earn‐outs/ contingent consideration
  • Retentions and escrows
  • Indemnity

Capital markets transactions

  • Prospectus and sponsor’s role
  • Long form report
  • Working capital review
  • Consultants’ reserve reports
  • Statement of Benefits

Case studies

The course will include a range of case studies such as:

  • A classic financial due diligence package
  • Failed transactions ‐ The risks and consequences of limited/ incomplete due diligence