Description

Introduction of Financial Due Diligence(M&A)

Financial Due Diligence (FDD) is a critical process in Mergers & Acquisitions (M&A) that evaluates the financial health, risks, and opportunities of a target company. This Financial Due Diligence(M&A) training provides a comprehensive understanding of financial due diligence methodologies, risk assessment techniques, and key financial metrics to ensure informed decision-making in M&A transactions. Participants will gain practical insights into identifying red flags, assessing financial statements, and mitigating deal risks.

Prerequisites

• Basic knowledge of financial statements and accounting principles
• Familiarity with M&A processes and corporate finance
• Understanding of valuation techniques (recommended but not required)

Table of Contents

1. Introduction to Financial Due Diligence in M&A

• 1.1 Role and Importance of Financial Due Diligence
• 1.2 Differences Between Financial and Other Due Diligence Types
• 1.3 Key Stakeholders in Financial Due Diligence
• 1.4 Common Challenges and Pitfalls

2. Understanding the M&A Due Diligence Process

• 2.1 Pre-Due Diligence Planning and Scope Definition
• 2.2 Data Collection: Key Financial Documents and Reports
• 2.3 Analyzing Historical Financial Performance
• 2.4 Identifying Key Financial Risks and Red Flags
• 2.5 Presenting Due Diligence Findings to Decision-Makers

3. Analyzing Financial Statements for M&A

• 3.1 Income Statement Review: Revenue, Profitability, and Cost Analysis
• 3.2 Balance Sheet Evaluation: Assets, Liabilities, and Equity
• 3.3 Cash Flow Statement Analysis: Liquidity and Solvency Risks
• 3.4 Key Financial Ratios in Due Diligence
• 3.5 Quality of Earnings (QoE) Analysis

4. Revenue and Profitability Assessment

• 4.1 Identifying Revenue Recognition Policies and Risks
• 4.2 Evaluating Recurring vs. Non-Recurring Revenue
• 4.3 Gross Margin and EBITDA Analysis
• 4.4 Customer Concentration and Revenue Sustainability
• 4.5 Market Position and Competitive Financial Benchmarking

5. Debt and Liabilities Evaluation

• 5.1 Assessing Short-Term and Long-Term Liabilities
• 5.2 Understanding Debt Structures and Covenants
• 5.3 Unrecorded Liabilities and Off-Balance Sheet Risks
• 5.4 Employee Benefits, Pensions, and Contingent Liabilities
• 5.5 Impact of Liabilities on M&A Valuation(Ref: Mergers & Acquisitions(M&A): Strategies and Best Practices)

6. Working Capital Analysis

• 6.1 Importance of Working Capital in M&A Transactions
• 6.2 Analyzing Accounts Receivable and Payable
• 6.3 Inventory Valuation and Turnover Ratios
• 6.4 Seasonal Fluctuations and Cash Flow Considerations
• 6.5 Adjustments to Purchase Price Based on Working Capital

7. Tax Considerations in M&A Due Diligence

• 7.1 Evaluating Tax Liabilities and Compliance Issues
• 7.2 Transfer Pricing Risks in Cross-Border M&A
• 7.3 Identifying Tax Benefits and Incentives
• 7.4 VAT, Sales Tax, and Payroll Tax Considerations
• 7.5 Tax Structuring for Optimal Deal Execution

8. Identifying and Mitigating Financial Risks

• 8.1 Fraud and Financial Misrepresentation Detection
• 8.2 Assessing Accounting Policies and Practices
• 8.3 Impact of Economic and Market Conditions on Financials
• 8.4 Internal Controls and Governance Risks
• 8.5 Using Sensitivity Analysis for Risk Mitigation

9. Synergies and Post-Transaction Financial Planning

• 9.1 Identifying Cost and Revenue Synergies
• 9.2 Financial Integration Strategies Post-Merger
• 9.3 Adjustments to Financial Projections Post-Acquisition
• 9.4 Monitoring and Measuring Financial Performance Post-Deal
• 9.5 Case Studies: Successful and Failed Financial Integrations

10. Case Studies and Practical Applications

• 10.1 Real-World Examples of Financial Due Diligence in M&A
• 10.2 Lessons from Failed Deals Due to Poor Financial Due Diligence
• 10.3 Industry-Specific Due Diligence Considerations (Tech, Healthcare, Manufacturing)
• 10.4 Interactive Workshop: Conducting a Financial Due Diligence Review

Financial Due Diligence is a critical step in ensuring successful M&A transactions by uncovering financial risks, validating valuation assumptions, and improving negotiation outcomes. This training equips professionals with the analytical skills and best practices to assess financial health, mitigate deal risks, and drive informed decision-making in M&A transactions.

Reference