Are you scouting for companies that you can acquire? Then you must have on your team someone comfortable with due diligence. You are taking a risk while making such investments, but then your part of the risk that comes from getting bad information about a company will be minimized.
The step that is most critical when you want to acquire a company is to perform due diligence that goes deep into the accounts of a company so that you get a realistic financial view, and this is what will determine how risky the purchase is. Engage an outsourced or fractional CFO to review financial statements and other relevant documents, so that you can ensure that you can build a deal that is best for both sides.
Due Diligence Process – What is It?
When companies are being considered for acquisition, their principals will rarely have up-to-date documentation, and in some cases, it may not even exist. Tracking this documentation down and organizing it as needed can take a lot of time, and is often frustrating. Unfortunately, it is necessary to go through this process, as it is the only way that you can make a smart investment decision. Outsourcing this function to our fractional CFOs makes for financial sense as it allows you to continue to grow your own portfolio.
Due Diligence Checklist
Every acquisition will have its particular requirements for due diligence, but here are several items that your CFO must look into before you sign any contract:
Strong growth potential: Does the company you want to acquire have a significant presence in the market, and one that is only growing?
Industry: Are you investing in an attractive industry?
Strong existing team: Do the present executive-level managers have a concise focus, passion and vision for the company. Do they show deep knowledge about the industry? Does the team have directors, investors and advisors who are influential?
Intellectual property: Are all filings for company trademarks, copyright, and patents with USPTO up to date?
Sustainable competitive advantage: Does the company being acquired have advantages that will be of help when they want to innovate so that they stay ahead of any competition?
Solid metrics: What is the state of their key financial metrics like EBITDA, year-over-year revenue growth, cash flow statements and others?
Favorable risk/return profile: Does the outsourced CFO have confidence in the projections of the company’s business plan?
Non-competitive: Will there be any competition with other companies in your portfolio?
A Good CFO Helps In Making the Right Acquisition Decisions
These are just a few of the things that you must review during the period of due diligence of an acquisition. Shaila Chamberlain can help you to get a better understanding of the process of due diligence. Check her website https://schamberlaincpa.com/ and schedule a free consultation so that you can get the needed help before, during and after due diligence. We have the expertise and experience that can help your business to grow.