Pre-investment Financial Due Diligence (due diligence)

Modern business in one way or another is associated with financial investments: it is necessary to purchase the equipment to optimize internal work; larger companies need new offices and branches. Regardless of what the entrepreneur is going to invest in, he/she cannot do without preliminary analysis and investment assessment. Such methods will help to determine the effectiveness of business development in a given situation, and will also give an understanding of how such an investment will affect the activities of the partners of the firm, banking institutions with which they cooperate, and how the internal management system of the company will change.

Business investment appraisal is a method that can help to prevent many problems and consequences of a bad investment. In addition, a properly conducted investment assessment allows you to check a potential purchase object for the reliability of all reporting, including financial and tax, as well as identify risks and pitfalls that may lie in wait for an investor. Accordingly, the pre-investment financial examination is aimed at identifying financial risks, searching for opportunities to minimize these risks, assessing the investment attractiveness and financial reliability of the investment object.

The purpose of financial due diligence is not only to determine the investment risks. It is an effective tool for optimizing the corporate and tax structure of a business in order to protect assets from hostile takeovers or improve the financial management of an enterprise.

The EBS consulting company offers its clients professional services in conducting a pre-investment financial due diligence of an object.

Investment appraisal, expertise

EBS employees carry out a detailed assessment of investment risks. If it is not carried out, the buyer may face extremely unpleasant consequences of the investment, in particular:

1. to make a mistake with the object of purchase (that is, the acquired office or branch may be useless in business development). For this, an assessment of the effectiveness of investments is provided.
2. to fall for the bait of scammers. In the last 5 years, a kind of “business” has become widespread: objects that are completely ready for work are put up for sale, but after paying a deposit or the full amount, the seller suddenly disappears. To prevent this from happening, it is necessary to study in detail the reports of the seller’s activities for a certain period of time.
3. to overpay. An inexperienced buyer can pay for an object many times more than it is worth.
There are really a lot of risks in investing, so it is much more profitable for business owners to contact a specialized company that will provide all kinds of assistance in choosing and buying an object, rather than buying it “at random”.

As part of the financial expertise, EBS specialists analyze such key indicators of the company’s performance as:

• audit of financial statements for the period for compliance with the submitted statements with current legislation, as well as for assessing possible tax risks;
• analysis of financial statements to identify possible hidden liabilities to suppliers and employees of the company.
• analysis of existing accounting policies regarding the recognition of assets and liabilities;
• analysis of the quality of financial information and a brief overview of the internal control system through interviews with the main process owners;
• analysis of contracts with buyers (public offer) and suppliers;
• analysis of accounts receivable and payable (trade and other);
• analysis of loans, borrowings and other financing instruments;
• analysis of transactions with related parties;
• analysis of the structure of income and cost;
• analysis of the structure and dynamics of other expenses and income.

As a result of the financial due diligence, the client receives a detailed report on:

• Financial analysis of all key aspects of the company
• Analysis of the tax system of the enterprise with the identification of all “weak” points
• Assessment of key risks and recommendations for their minimization
• Investment attractiveness in the financial reliability of the business

ADVANTAGES

• Obtaining an expert opinion on the investment attractiveness of the company, the presence of investment risks and business profitability;
• Obtaining an independent view of the existing financial system, expert opinions on the state and prospects of the existing structure of the financial system of the enterprise;
• Identification and assessment of existing and concealed risks;
• The ability to assess the manageability and controllability of the business, to identify the shortcomings of the tax and financial systems, to avoid or significantly reduce the risks of potential financial penalties from counterparties, government agencies, etc.

Investments made wisely will help the company to increase its productivity – and, as a result, its income. However, it should be noted that any large investment is associated with certain risks that are best avoided. The EBS team is ready to help with this.

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