- Due diligence is the process in which interested party (e.g. potential buyer of the company) verifies relevant details from the company’s operations to identify risks and analyzes how to minimise potential negative effects of those risks. Reasonable investor will aim to reduce risks as much as possible, but not necessarily to eliminate them completely (since, in practice, this is difficult to accomplish and extremely expensive).
- Areas covered with due diligence depend on the nature of transaction and investor’s requirements. Comprehensive due diligence usually covers (a) financial, (b) legal, (c) commercial, and (d) technical aspect of the business. Equally, depending on requirements, for each aspect of business the desired depth of the analysis and level of specifics is determined.
- GRUBISIC & Partners have all relevant skills to:
- Independently perform financial due diligence
- Organize and coordinate legal, commercial and technical due diligence
As part of financial due diligence, we will perform the following:
- Analysis of relevant financial indicators
- Liquidity (current ratio, quick ratio, cash ratio)
- Activity (asset turnover, receivables turnover and receivables collection period, current liabilities turnover and payables’ days, inventory turnover in days, business cycle in days, cash cycle in days)
- Profitability (gross margin, EBITDA margin, net profit margin, return on assets, return on equity, return on invested capital, DuPont analysis)
- Solvency (net debt to EBITDA, total debt to total assets, debt to equity ratio, fixed charge cover)
- Analysis of structure, trends, sustainability, risks and relevant positions for the following categories:
- Revenue (per product, type of services, distribution channel, profit centre and other relevant business types)
- Gross profit and margins
- Operating expenses and EBITDA
- Depreciation and EBIT
- Costs of financing
- Tax (effective income tax rate)
- Receivables and inventories
- Tangible and intangible assets
- Liabilities to suppliers and other non-interest bearing liabilities
- Short-term and long-term debt
- Operating, investing, financing and free cash flow
- As part of financial due diligence, apart from detailed financial analysis, we should identify potential problems and risks such as recoverability of receivables, obsolescence and fair values of inventories, potential impairment of fixed assets, potential tax liabilities since expenditures are recorded as expenses instead of their capitalisation, value of unrecorded liabilities, contingent liabilities based on guarantees issued, planned or performed restructuring, etc.
For detailed scope of activities performed by GRUBISIC & Partners within this service please visit