Financial Due Dilligence

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FINANCIAL DUE-DILIGENCE
August 26, 2010 26

♣ Nitin Arora II
Associate Director

II

Corporate Catalyst India www.cci.in

Financial Due Diligence (FDD)
Financial Due Diligence is a reasonable level of enquiry into the financial affairs having a material impact on the prospects of the business A FDD review may not only look at the historical financial performance of a business but will generally consider the forecast financial performance also The objective is to ensure that prospective investors make an informed investment decision Its a fact gathering exercise with a focused analysis of information. The main sources of information for a FDD review include: Historical financial data including statutory accounts, g y , management accounts and reports and income tax returns Current financial data such as year-to-date management accounts Minutes of Directors’ Meetings and Management Meetings Directors FDD is about: Evaluation, Interpretation and Communication detailed

FDD – When Needed ?
Mostly sought for the following transactions: Disinvestments Strategic investments or a PE investment Acquisition of an undertaking / business Inbound and overseas investments Listing of securities in Indian or overseas market st g o secu t es d a o o e seas a et

Types of Due Diligence

Due Diligence Dili

Nature of Client

Nature of Work

Se S de Sell-Side (Vendor)

Buy-Side Buy Side

Financial

Tax

Legal

Commercial

Purpose of FDD
Identify potential risks for the buyer in its investment decision Evaluate quality of reported earnings and identify value drivers critical to the transaction Corroborate buyer assertions regarding target’s financial position target s Identify issues to be addressed in purchase agreements Assess strengths of financial personnel and systems Improve transaction structure Identify areas for post-acquisition attention…...

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