As part of the firm's consulting services, BDO Consulting Groups offers close guidance to clients in preparing financial and accounting due diligence for acquisitions of mergers. The due diligence is an indepth and focused analysis, bridging information gaps and thereby diminishing the risks and exposures which a potential buyer takes upon himself.
This type of investigation tests the adequacy of financial information and the specific character of the company or operation being acquired, and the results are analyzed with a view to understanding their profit centers, composition of expenditures and investments as well as the structure of working capital required for their ongoing activity.
The due diligence might address a company designated for sale, a joint venture, strategic partner, etc. A financial review provides the investor with information concerning the assets and liabilities being acquired, while an assessment is made as to whether the deal would serve the investment strategy.
Often, the final price of the transaction or even its actual existence, is influenced by the due diligence results. Investors who have decided to forego such review, preferring instead to rely on their intuition, "gut feeling" or logic, discovered more than once that they had in fact purchased a "cat in the bag" – at an excessive price!