LOI Signed. In Due Diligence
January 20, 2021
by a searcher from Columbia University - Columbia Business School in Princeton, NJ, USA
It's an asset purchase in the manufacturing space. Aside from the standard QoE and quality of cash, cash conversion cycle, customers, suppliers, aged AR, equipment, etc, any other important financial due diligence for a manufacturing company? Is the leased assets going to be paid off by the seller at closing? What about the rental lease? Also, from an operational perspective, what kind of dd should I focus on? Many thanks!
from The University of Chicago in Chicago, IL, USA
2) Inventory costing (FIFO, LIFO, average, WIP, OH, obsolescence, etc.), frequency of counting, perpetual costing during monthly, order quantity and frequency, etc. are extremely critical.
3) I am surprised that the signed LOI does not address leased assets and rental lease. Are these operating lease or capital lease?
4) I am guessing working capital target is not in LOI. This is more challenging for manufacturing. businesses.
5) Also important is accrual .
6) There many more line items depending on the type of "manufacturing",
from University of Toledo in Shaker Heights, OH, USA