Al Banyan Tree’s Financial Due Diligence service provides clear, objective insight into a target company’s financial health. We perform a comprehensive review of financial statements and performance drivers to ensure you have all the facts before an investment or acquisition. Our clear, confident, and analytical approach to Financial Due Diligence (FDD) helps institutional buyers and sellers alike make informed decisions with no post-deal surprises.
Financial Due Diligence Overview
Financial due diligence is a thorough investment analysis of a company’s historical and projected financial performance. The purpose is to validate the company’s true earnings power, identify financial risks, and confirm that all financial aspects align with the deal’s value and strategic goals. We focus on earnings quality through Quality of Earnings (QofE) analysis – adjusting EBITDA for one-time or non-recurring items to reveal sustainable profitability. We also scrutinize net working capital, cash flow, and debt levels because working capital review is critical in a deal to ensure the business has adequate liquidity and to set accurate purchase price adjustments.
Al Banyan Tree delivers financial due diligence with a structured, phased approach for transaction support. We often begin with a high-level “red flag” review to quickly surface any deal-breakers or red flags in the financials. Then we conduct a deeper dive covering all key components of an FDD report – including detailed balance sheet and income statement analysis, cash flow evaluation, and validation of management’s forecasts. By analyzing adjusted EBITDA, working capital trends, and net debt/indebtedness, we provide an objective basis for valuation and negotiation. Our team also evaluates industry-specific KPIs and uncovers any hidden costs or liabilities, ensuring nothing is overlooked.
Our buy-side diligence engagements give prospective investors a 360° view of the target’s finances, enabling confident pricing and deal structuring. For sell-side diligence (vendor due diligence), we help sellers pre-empt issues by identifying and addressing financial weaknesses before going to market, thus building trust with buyers. Throughout the process, we coordinate with legal and tax due diligence teams for a holistic analysis (financial, commercial, and operational). We leverage advanced analytics and digital tools – even AI-driven analysis – to quickly process virtual data room information and spot anomalies. The result is resilient and objective findings that stand up to scrutiny, providing a foundation for informed negotiations. In short, our Financial Due Diligence service ensures transaction support from start to finish, so you can proceed with confidence knowing the numbers are solid.
Al Banyan Tree delivers financial due diligence with a structured, phased approach for transaction support. We often begin with a high-level “red flag” review to quickly surface any deal-breakers or red flags in the financials. Then we conduct a deeper dive covering all key components of an FDD report – including detailed balance sheet and income statement analysis, cash flow evaluation, and validation of management’s forecasts. By analyzing adjusted EBITDA, working capital trends, and net debt/indebtedness, we provide an objective basis for valuation and negotiation. Our team also evaluates industry-specific KPIs and uncovers any hidden costs or liabilities, ensuring nothing is overlooked.
Our buy-side diligence engagements give prospective investors a 360° view of the target’s finances, enabling confident pricing and deal structuring. For sell-side diligence (vendor due diligence), we help sellers pre-empt issues by identifying and addressing financial weaknesses before going to market, thus building trust with buyers. Throughout the process, we coordinate with legal and tax due diligence teams for a holistic analysis (financial, commercial, and operational). We leverage advanced analytics and digital tools – even AI-driven analysis – to quickly process virtual data room information and spot anomalies. The result is resilient and objective findings that stand up to scrutiny, providing a foundation for informed negotiations. In short, our Financial Due Diligence service ensures transaction support from start to finish, so you can proceed with confidence knowing the numbers are solid.
How we can help
- Review historical financialsWe examine past financial statements in detail to identify trends, verify revenue and earnings consistency, and spot any anomalies or red flags.
- Identify financial risksWe pinpoint potential financial risks or deal-breakers – such as aggressive accounting practices, unrecorded liabilities, or volatility in earnings – so there are no hidden surprises.
- Normalize EBITDAWe calculate adjusted EBITDA by removing non-recurring or unusual items, so you understand true earnings quality and sustainable profit before valuing the business.
- Analyze key revenue and cost driversWe break down the target’s revenue streams and cost structure to understand core value drivers of the business and test the stability of its margins and growth.
- Assess working capitalOur team performs a thorough working capital review to analyze requirements and seasonal trends, ensuring sufficient liquidity and proper adjustments in the deal.
- Validate forecasts and assumptionsWe perform rigorous forecast validation, scrutinizing management’s projections and key assumptions to test their plausibility and ensure the investment case holds up under various scenarios.
- Evaluate cash flow and debtWe evaluate cash flow generation, debt levels, and debt-like obligations to gauge the target’s liquidity strength and financial leverage, including net financial debt analysis.
- Deliver investor-ready reportingAll findings are compiled in a clear, investor-ready report with executive summaries and detailed analyses. Our reporting highlights crucial issues and insights, providing stakeholders with a document they can rely on to make decisions or present to boards and lenders.
Benefits of Working with Al Banyan Tree
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Make informed investment decisions
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Avoid post-deal surprises
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Strengthen valuation confidence
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Improve deal structuring
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Accelerate execution timelines
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Mitigate financial and operational risk
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Align diligence with strategic goals
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Support lender and board requirements
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Enable smoother post-merger integration
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The duration of financial due diligence varies with the size and complexity of the target company. Generally, the process can take anywhere from a few weeks to several months. A straightforward small business might require only 2–4 weeks, whereas a large or complex transaction can extend to a few months. Factors like the availability of complete financial data and the scope of review will also impact the timeline.
Reviewing working capital is crucial to gauge a target company’s short-term financial health and liquidity. Even a profitable business can struggle if it doesn’t have enough working capital to cover day-to-day expenses. Due diligence examines trends in receivables, payables, and inventory to ensure the company can sustain operations without additional cash infusions. Often, buyers and sellers agree on a normalized working capital target for the deal – a detailed working capital analysis during due diligence helps set that benchmark and avoid post-acquisition surprises.
A financial due diligence report delivers a comprehensive analysis of the target’s finances along with key findings. Typically, it opens with an executive summary of major findings and conclusions, then provides detailed sections examining the income statement (including a quality of earnings analysis and profitability trends), the balance sheet (reviewing assets, liabilities, and net debt), and cash flow statements. The report will highlight any necessary adjustments (such as normalized EBITDA) and assess working capital requirements. It also identifies any financial risks or red flags uncovered during the review. In the end, the report offers recommendations and deal considerations based on the findings, which support final negotiations and decision-making.
Let’s Get Started
We equip decision-makers with clear, reliable financial analysis that drives sound investment outcomes. Whether you’re on the buy or sell side, our due diligence helps uncover value — and avoid risk.
Get in touch to discuss how we can support your financial diligence process.
Get in touch to discuss how we can support your financial diligence process.