Here are my takeaways about financial due diligence as a former traditional searcher and current self-funded searcher who conducted several financial due diligence processes:
Financial reviews should vary according to deal size, industry type, and nature of revenue/financials. I see this in three ways:
Level 1: Deals under $500k EBITDA: Agreed Upon Scope of Procedures with CPA or advisor (cost up to $10k), recommended for self-funded searchers looking at small deals
Level 2: Deals from $500k-2M EBITDA: Quality of Earnings "Light" by professionalized accounting firm or individual CPA (cost $10-20k), recommended for self-funded searchers
Level 3: Deals over $2M EBITDA: full Quality of Earnings by professionalized accounting firm (cost starts around $35k), recommended for self-funded searchers looking at larger deals, and recommended for all traditional searchers
For deals that are outside the norm (extremely messy/complex financials, government regulations, or other), level up.
What did I miss?
What type of financial review did you conduct prior to your acquisition? Is there anything you missed, or how would you change your experience for the better? Comment your recommendations for accountants and professionals who conduct financial reviews for self-funded deals. Cheers!
Financial Due Diligence Guidelines
by a searcher from University of Virginia-Darden - Darden School of Business
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