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WSO Free Modeling Series - Now Open Through
April 30, 2024
9 Free Financial Modeling Lessons
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
+Bonus: Get 27 financial modeling templates in swipe file
+Bonus: Get 27 financial modeling templates in swipe file
Easily be able to tell whats a BS item from a non-bs one and the break down.
The adjustments are the important number as they will likely impact valuation. Ultimately, you hire FDD teams to make sure the books are somewhat legit. It's not an audit, but it's a third party affirmation that you're (hopefully) not investing in a business with phony numbers. Further, I like to walk through areas such as bonus accruals, inventory reserves, etc. as the ways Company's report can vary (especially with international businesses) so you understand what the numbers actually mean.
The other important section is net debt as indebtedness will be a dollar-for-dollar reduction from seller proceeds based on the purchase agreement.
When applicable / available, we also have them look at revenue by customer / product, seasonality, etc., but again it's mostly to validate the previously-provided VDR info instead of some deep analysis. As the PE firm, we've probably already done that.
Great response - how often are you bringing them in to help negotiate NWC pegs? Additionally, the Big 4 have seemed to invest a ton in their data analytic tools that really do a deep dive on customer trends and metrics (especially in the SaaS space). Do you typically avoid the upsell here or is there a benefit to outsourcing some of your work on revenue driver to the FDD team?
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