Acquisition audit prior to an investment decision
- Valuation and financial expertise
For a property developer
Context
Our client has asked us for an audit mission in the context of a project to acquire a target company.
Objectives of the acquisition audit
Our initial work was directed at helping our client identify risks and opportunities that might be material to their investment decision.
Based on the available information and management presentations, we conducted an in-depth analysis of the significant issues identified.
Scope of the report and work
Our work was based on the following themes:
Presentation of the target company
- Description of its contractual and legal environment
- Presentation of the target’s key figures over historical periods
Quality of financial information
- Comments on the procedure for drawing up the accounts, accounting rules and methods applied, internal control mechanisms ;
Balance sheet of the last closed accounts
- Analysis of the main balance sheet items and their changes compared to the previous year, including :
- Major capital assets and their depreciation periods ;
- Composition of goods inventory ;
- Receivables and customer portfolio (average payment period, correct settlement of receivables after closing, disputes, bad debts, etc.) ;
- Justification of cash balances ;
- Review of financial and operating debts, average payment time to suppliers ;
- Review of provisions and litigation ;
Profit and loss account for the most recently closed accounts
- Analysis of the main income statement items and their changes from the previous year, including
- Review of turnover, breakdown by customer, by type of service ;
- Study of operating expenses and identification of exceptional items (non-recurring) ;
- Review of personnel costs and staffing levels.
- Breakdown of “normalized” adjusted EBITDA
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