Financial due diligence is key to enabling informed decisions about proposed investments or divestments. The FDD exercise supports sellers, buyers and providers of finance by enhancing knowledge about the financial performance of a business.
FDD in mergers and acquisitions (M&A) can help by:
- identifying red flags and risks so that buyers and funders can make an informed decision;
- analysing financial performance to test the deal hypothesis and investigating financial areas of particular focus or concern; and
- supporting the overall valuation of the target business being acquired.
The guideline mainly focuses on deals in the UK and continental Europe, but touches on how practice varies in the US and emerging markets.
It also highlights other areas of due diligence and how FDD may interact with them.
Read the guideline to learn about:
- forms of FDD and vendor assistance;
- the purpose of FDD;
- users and their requirements;
- setting the scope and influencing factors;
- use of digital tools, including AI; and
- how findings are reported and how they are used.
This guideline is primarily focused on FDD in the context of an M&A or debt financing transaction, although many of the principles apply to FDD in the context of a public market transaction.
Launch event
On 22 October the Corporate Finance Faculty held an event to mark the launch of our new guide, Financial Due Diligence. We were joined by leaders of the UK's corporate finance community to discuss how financial due diligence is developing to support more complex and demanding investment decisions.
Read the full guideline
This Corporate Finance Faculty guideline, authored by experienced specialists from PricewaterhouseCoopers LLP, UK, sets out best practice for FDD on both sell-side and buy-side transactions.
