Home / Services / Financial Due Diligence Services
DUE DILIGENCE
Financial Due Diligence for Acquisitions and Investments
Financial due diligence examines the financial realities and risks behind a proposed acquisition, investment or partnership. NMS Consulting reviews earnings quality, net debt, working capital, cash generation and relevant commercial factors to support informed transaction decisions.
WHEN TO CONSIDER
When to Consider Financial Due Diligence Services
Published accounts alone may not reveal every issue relevant to a transaction. A detailed review becomes critical when:
ADVISORY FOCUS
Key Advisory Priorities
We adapt our approach to the organisation's objectives, available information and the proposed transaction or strategic decision.
Financial due diligence and quality of earnings
Assess reported profitability against recurring operating performance. Review exceptional items, related-party transactions, accounting policies and movements in cash conversion.
Net debt and normalised working capital
Analyse borrowings, cash, contingent and debt-like items alongside receivables, inventory and trade payables. Estimate the normal level of working capital and potential transaction adjustments.
Commercial and operating risk analysis
Consider revenue sustainability, customer and supplier concentration, market exposure, operations and management dependence. Coordinate legal and tax reviews with appropriate specialists when required.
SCOPE OF SERVICES
Scope of Services
Individual workstreams and the level of analysis are agreed in advance. A mandate may include:
Historical financial analysis
Review income statement, balance sheet and cash flow trends, reconciling key management information where possible.
Quality of earnings (QoE)
Analyse sustainable EBITDA, non-recurring items and factors affecting the reliability of reported performance.
Net debt and debt-like items
Identify financial debt, cash equivalents, liabilities and adjustments potentially relevant to purchase price.
Working capital review
Assess collection cycles, stock levels, trade payment practices, seasonality and normal working capital requirements.
Revenue and customer risk
Examine customer/product concentration, revenue trends, pricing and indications of commercial sustainability.
Transaction issues and actions
Summarise findings, quantify material exposures where feasible and identify matters for negotiations, documentation or completion.
KEY DELIVERABLES
Typical Deliverables
The following outputs may be prepared according to the agreed project scope:
HOW WE WORK
Our Approach: Four Stages
01
Scope the review
Agree transaction objectives, materiality, timeline, information requirements and workstreams.
02
Review the evidence
Examine financial records, supporting schedules, management explanations and operating indicators.
03
Quantify key findings
Analyse earnings quality, net debt, working capital and material value or completion risks.
04
Report and follow up
Present findings, unresolved issues and potential implications for commercial negotiations and closing.
KEY CONCEPT
How does due diligence differ from a financial statement audit?
A statutory financial statement audit aims to express an opinion under the applicable audit framework on whether the financial statements meet the required reporting criteria. Transaction due diligence is usually tailored to buyer or investor objectives and focuses on commercial risks, earnings sustainability, working capital and price-sensitive findings. It is not a substitute for an audit, and the depth of work depends on the agreed scope and information availability.
Strategic Perspective
Financial and Governance Perspective
Turning Due Diligence Findings into Transaction Decisions
The purpose of due diligence is not simply to produce a list of observations. Material findings should be assessed for their potential effect on value, funding needs, closing conditions or integration priorities. For example, a recurring working capital shortfall may be commercially different from an isolated reporting adjustment, even if both influence the transaction model.
Our review distinguishes information that can be verified from management estimates and unresolved questions. Where evidence is incomplete, limitations are documented rather than obscured. Buyers and investors can then decide which issues require further investigation, revised commercial terms, specialist advice or post-completion action.
- Trace significant adjustments to supporting records where available.
- Quantify exposures when the information supports a reasonable calculation.
- Maintain an open-items list for matters not resolved before signing or closing.
EXPLORE TOGETHER
Related Advisory Services
Mergers and Acquisitions (M&A) Advisory
M&A advisory for acquisitions, mergers and company sales: target research, business valuation, due diligence, negotiations and closing support.
Business Valuation Services
Business valuation services using DCF, market multiples and cash flow analysis for acquisitions, company sales and investor negotiations.
Investor Sourcing and Capital Raising Advisory
Investor sourcing and capital raising advisory: investment readiness, business valuation, financial models, pitch decks and investor research.
RELATED INSIGHTS
Explore Further Reading
GUIDE
Due Diligence Checklist for Company Acquisitions
A due diligence checklist organises the information a buyer or investor needs before completing a company acquisition, investment or major partnership. It shou
Read Guide →
FREQUENTLY ASKED QUESTIONS
Questions About Financial Due Diligence
What is financial due diligence?
It is a transaction-focused review of financial performance, earnings quality, net debt, working capital and other material financial issues to support investment or acquisition decisions.
What is quality of earnings?
Quality-of-earnings analysis evaluates whether reported earnings are sustainable and identifies one-off, non-operating or otherwise unusual items that could distort recurring profitability.
Why does working capital matter in an acquisition?
Normal working capital levels affect the amount of cash required to operate the acquired business. Deviations from an agreed normalised level may influence price adjustments or closing negotiations.
When is due diligence carried out?
It often follows a preliminary offer or letter of intent and precedes binding completion, although the exact sequence varies by transaction and jurisdiction.
Does financial due diligence cover legal and tax risks?
Financial due diligence can identify issues requiring further expertise, but formal legal and tax due diligence is carried out or coordinated with suitably qualified specialists as required.
How does the advisory engagement begin?
An initial discussion identifies business objectives, information needs, intended decisions and the proposed scope of work.
Talk to Our Advisory Team
Share your business objectives, decision stage and preferred timetable. NMS Consulting can help identify a practical and proportionate advisory scope.
Independent reference: CFA Institute research and financial analysis resources — Visit official source ↗